Venture Capital Funds

You might have heard stories of how someone started their business with venture capital funds and are now succeeding considerably with their venture. This might have definitely kindled the flame of optimism within you and now probably you are looking for a source to get venture capital funds as well. But you must know one thing—wishing for venture capital funding is one thing, actually getting it is another.

First of all, you should know who venture capitalists are. These people are basically investors, but they may or may not be using their own money to invest. Unlike angel investors who always invest their own money, venture capitalists are usually proper companies with a team of investors. When they see a good business proposal that probably has a lot of merit, they think about investing in it. Their idea is to put in a good amount of investment and then get returns at the end of the day. These people are generally businesspeople themselves. They have had businesses probably and now have money to invest. They could be retired persons with a vast store of knowledge. Most of these people will invest money as well as their knowledge in running businesses.

The best part about venture capital funds, if you are able to get them, is that you will also gain from the experience of the people in the venture capital network. These people might even get employed in your company in managerial posts or ask to be placed on the board of directors. This serves two purposes—one they can closely monitor what’s going on with your company and basically see that you are not doing anything wrong, and two they help your business to actually progress and make the kind of profits you have started out to achieve.

But, grabbing the attention of venture capitalist financers is a very tall order. These people have money, but they won’t want to invest it unwisely. Venture capital investment is a lot of risk and these people surely want to play it safe. So, they will sniff out business ideas that have a lot of potential in them and will only back them up when they are convinced that the idea will be successful. It is all right if the entrepreneur they are dealing with is a novice—they have an immense pool of knowledge and experience themselves to help budding entrepreneurs realize their business goals and ambitions.

It is in the initial stages that the venture capitalists will take the highest amount of care. They will go through the business plan with a fine toothcomb and make sure that there are no holes in it. They will want a watertight plan to invest in—a plan that can surely bring returns. So, one of the primary requirements is that your business plan should be novel, and solid. It should be something that the investors see their profits in. If the product or service you are planning to create has something that fulfills an essential need of the market or improves upon an obvious shortcoming, the venture capitalists are going to see it as a more lucrative proposition and will be likelier to invest in it.

One thing that really helps here is your knowledge of your target market. Most businesses right now deal with niche markets. You need to be pragmatic about this and know what your niche market is. You should know what they are looking for, and then you have to have solid plans about how you intend to give these things to them. You have to be realistic in your business plan and mention about the current deficiency or demand and how your business will be able to set things aright. You might also want to mention about the current competition that exists in the market and how to plan to improve the product or service that your competition dishes out. Such are the things that attract better venture capital funds.

Venture capitalist financers are also looking at how you plan to benefit society at large with your products. That doesn’t mean they are looking for philanthropic accolades, but there is a very practical side to it. If your business is going to benefit society in some manner, then it is almost a given that there will be many takers for it. Your business will earn stability and credibility and its prospects will definitely increase. It will become a long-term thing. This is what the venture capitalists are looking for. So, if your business is going to improve societal conditions in any manner, make sure you mention that in the business plan that you will provide the venture capitalists along with your application.

Then there are other factors that you have to mention. Do you think your business will be active all through the year or will there be some slack seasons? Will your business have a slump for sometime because of some external factor? What will be the peak season for your business, if any? What will be the length of time before your business breaks even and starts making profits? What will be the recurring investments your business will need? These are some points that the venture capitalists want to know in order to make sure how much the business is going to cost them.

Basically, what the venture capitalist funding providers are looking for is a detailed and honest report in which you mention all the highs and lows of the entrepreneurial task that you are planning. They want to know how well you will be able to overcome those problems and, most importantly, they want to know whether investing in your business will be profitable to them. Though they may invest solely based on a business concept that appeals to them, they will want to make sure that you can implement those ideas well too. There have been instances where venture capital funds have been attracted just because the business concept was so good. The venture capitalists then took over the entire management o the idea to make sure that the great concept wasn’t nipped in the bud but made the profits that it deserved to make.