Joint venture funding has become quite popular of late. Simply put, it is a venture in which different parties pool in their resources—monetary, technical, intellectual, etc.—and start a business. In a joint venture collaboration, all parties involved have equal stakes; they have all invested in some form or the other, and hence they all benefit when the business succeeds. This is a partnership business in its loose sense of the term where everyone who invests has an interest in the success of the venture. Today, many small and medium businesses are operated in the joint venture manner, while lately some large corporations have also started employing this method as a means to diversify or break into newer markets.
When we speak about joint venture funding, we are generally speaking about a situation in which one of the parties involved has the necessary funds required for starting the business while the other party is mostly going to put in the intellectual and technical inputs. For instance, if you have a great business idea but you don’t have the finance to implement it, you could look at joint venture funding as a way to fulfill your business aspirations. You could get in touch with a potential person with finance to invest, tell them about your business concept and if they are impressed, they might agree to enter into a joint venture funding collaboration with you. This is the general way in which joint venture funding works.
In such a situation, it will be you who will be handling all the practical tasks of your business such as handling the production, managing the employees and the finances, getting clients, advertising and so on. You will be required to ‘run’ the business, so to speak, while the person who has provided the joint venture funding capital will be concerned with providing the adequate monetary contributions that are needed for running the business.
However, we need to point out that this is not the way in which all joint venture collaborations work. In most situations, joint venture entrepreneurs will decide what each of them will chip in. It is a very unlikely situation that one of them will pool in all the finance and the other will look after all the administrative tasks. Generally, they divide work and capital in a particular ratio and hence the profits or losses are divided in an appropriate ratio as well. This is done so that all parties involved in the joint venture collaboration have equal stakes in the business they are planning and share the burden on an almost equal basis.
The truth is that joint venture funding should not be taken lightly. This is collaboration where interests of more than one person are involved. Hence, if you are participating in such a collaborative effort, you must make sure that you dedicate yourself toward your share in the business fully and whole-heartedly. At the same time, you have to also collaborate with the other people in the business. You have to have complete communication with your joint venture collaborators. Decisions in a joint venture aren’t made by a single person. Everyone involved in the joint venture collaboration will come together and take important business decisions. This is because everyone has an equal right to what they have contributed toward the joint venture funding.
So, how do you make sure that joint venture funding is the right way for you to realize your business? The following are some tips that might help you.
- First and foremost, you need to be sure of your own business idea. Make a full study of what your business will entail, what you will provide and how you will go about it. Make a business plan. If possible, also make a realistic business proposal. The person who will offer you the joint venture funding will want to assess what kind of return of investment your business will have. Your business plan should be such that it can convince them enough to enter into a collaborative venture with you.
- The next question is how you will find a suitable joint venture partner. These people aren’t moving about on the streets. To find them, you will probably have to join a business club in your area or look online. Business clubs have events where people with money and ideas to invest for businesses come together. These seminars could tell you where you could find someone to collaborate with. Also, there are various joint venture associations established online. These are highly regulated, moderated communities where the people who run the website take care of creating the contacts between various people who could be good for each other. These are definite places where you can get a joint venture funding partner, but then there are other things to look for too.
- You have to see what the interests of the person who is ready to provide you with the joint venture funding are. Is this person only interested in getting a return of the monetary investment and just wants to invest the money somewhere? Or, is this person genuinely interested in the idea and is also enthusiastic about it? It is a great idea to get in touch with someone who has similar business interests and probably has some experience in the same field as well. Such people will be more responsive to your joint venture funding needs, and not in a strictly material sense.
- Submit your proposals to them. You will need to have meetings with them if they are interested in your initial proposal. Deals and individual interests will be discussed at this point, and agreements will be made. This is where you are advised to have an attorney to safeguard your interests.
This is typically how a joint venture funding collaboration works. It is laborious, and not easy to get a joint venture partner, but if you do manage to find the right person, you will find that the benefits seriously outweigh what you have to put in.