Venture Capital Archives - Page 4 of 9

08/13/201406/28/2017

Basic Principle of Financing

Poor management is often referred to as the main factor of why businesses fail. Lacking or poorly timed financing is a nearby second. Whether you are a starting up business or expanding your business, adequate capital is important. Yet it is insufficient to essentially have enough financing; understanding and planning are necessary to control it well. These qualities will ensure business owners to avoid mistake like having a wrong type of financing, or underestimating the cost of borrowing money.

Ask yourself this question before inquiring about financing:

Do you need more capital or can you work on with your existing cash flow?
How do you characterize your need? Do you need the money because you want to expand? Or as a cushion against risk?
How vital is your need? You can get the best terms when you foresee your needs rather than looking for money under pressure.
How big is your risk? All businesses suffer from risks and danger, and the level of danger will influence expense and accessible financing plan B.
How strong is your management team? Management is the most important element surveyed by money sources.

Possibly most importantly, how does your need for financing mesh with your business plan? If you don’t have a business plan, make writing one your first priority. All capital sources will want to see your plan for the start-up and growth of your business.

Don’t assume all money is similar

There are two types of financing: equity and debt financing. If you are looking for money you should consider your business debt to equity ratio – the difference relatively concerning dollars you’ve borrowed along with dollars you’ve invested in your organization. The harder money masters include invested in the organization, the more it really is for you to entice loan.

If your company has an excessive percentage of equity to debt, you may want to seek debt financing but if your company has a high percentage of debt to equity, experts say you should increase your ownership capital for added funds. In this way you will not be over-leverage to the point of ruining your company’s welfare.

Equity Financing and Venture Capital

Most small scale businesses use limited equity financing but with debt financing, additional equity mostly come from non-professional investors like friends, relatives, employees or customers. However, the most common source of professional equity funding comes from venture capitals. These are institutional risk takers and may be groups of wealthy individuals, government-assisted sources, or major financial institutions. Most specialize in one or a few closely related industries.

Venture capitals are sometimes seen as deep-pocketed financial gurus looking for start-ups in which to invest their money, but they most often prefer three-to-five-year old companies with the potential to become major regional or national concerns and return higher-than-average profits to their shareholders. Venture Capitals earn money by owning equity in the companies it invests in. They generally prefer to influence a business passively, but will react when a business does not perform as expected and may insist on changes in management or strategy. Changing some of the decision-making and some of the potential for profits are the main disadvantages of equity financing.

Debt Financing

Banks, savings and loans, commercial finance companies, and the SBA are some of the sources for debt financing. State and the local government have come up with programs in the recent years to give encouragement to the growth of small business to help increase the economy. Family members, friends, and former associates are all potential sources, especially when capital requirements are smaller.

Banks traditionally have been the major source of small business funding. Their main role has been as a short-term lender offering demand loans, seasonal lines of credit, or single-purpose loans. Banks generally have been unwilling to offer long-term loans to small firms. The SBA guaranteed lending program encourages banks and non-bank lenders to make long-term loans to small firms by decreasing their risk and leveraging the funds they have available. The SBA’s programs have been an integral part of the success stories of thousands of firms nationally.

In addition to equity considerations, investors or lenders mostly require the borrower’s personal guarantees in case of default. This will assure that the borrower has a sufficient personal interest at stake to give attention to the business. For most borrowers this is a burden, but also an obligation.

More detailed information and useful advice can be found at Funded.com Created by Mark Favre, it offers expertise and assistance with developing and funding your concept, including a private forum for queries and discussions. If you need access to investors and funding providers, please do check our website.Funded.com
Copyright 2014 Funded.com LLC

06/09/201406/28/2017

Equity crowdfunding and venture capitalism: Why it matters?

The United States government has approved a landmark law for entrepreneurs, especially those involved in the small and medium enterprises sector, in 2012. Known as the Jumpstart Our Business Startup – or JOBS – Act of 2012, the legislation enables startups to raise as much as one million dollars through various websites that will be established following the implementation of the law.

There are a number of people, both supporters and critics of JOBS Act, who argue that the law will affect the more traditional venture capitalists. They say that by providing support to crowd funding – or raising funds that come from different people to finance a business – the government essentially removed venture capitalists from the picture.

A number of people are happy with this possibility, but a whole lot more are shaking their heads. After all, venture capitalists, over a period of time, have made it possible for a lot of major businesses to flourish.

The reality, however, is that JOBS Act does not diminish the relevance of venture capitalism in the field of entrepreneurship. In fact, it can be argued that the law will strengthen the system and would enable more businesses to enter the arena. Here’s why:

Crowd funding and venture capitalism may end up having different clients

According to the law, the legislation will enable businesses to raise as much as one million dollars in capital through crowd funding that will be assisted by dedicated online portals. This in itself shows a major difference between the two funding sources.

Based on latest studies, the median of venture capitalist investments in the country in the past three months is at four million. This means that the clients of crowd funding and venture capitalism will come from different backgrounds as they will need different amounts of money.

Instead of “killing” venture capitalists, the law may have just given them the opportunity to find better deals as businesses that need smaller funding will have another platform for them to look for investments.

Crowd funding and venture capitalism are made for each other

These two are in fact a perfect match. With the existence of an established system of funding (i.e. crowd funding for smaller businesses and venture capitalism for slightly bigger ones), entrepreneurs will have an assurance that there will be support as their business grows.

Moreover, the existence of crowd funding system should not threaten or drive away venture capitalists as there are always businesses looking for investments. In fact, they can even use the portals to take part in crowd funding initiatives or scout possible partners that are looking for investments.

The nature of the legislation is to provide entrepreneurs – especially business startup owners – with an equal opportunity to look for people who may help them in establishing their businesses. While it is true that the law will create ripples and affect the already established system of funding in the United States, it is imperative for everyone to understand its objectives and see to it that it achieves its goals.

04/15/201306/28/2017

Available Corporate Venture Funds for Business Startups

In recent years, the number of available venture capital funds for business startups that are coming from traditional sources has started to go down. Fortunately, there is a viable alternative – corporate venture funds.

It can be noted that a several multinational corporations have started to allot some of their funds for business startups. Latest data show that roughly around 900 corporate venture funds are currently available for new businesses. Last year, around 16 percent of companies have acquired corporate venture capital, a number that is expected to increase this year.

Corporate venture funds have been available for more than two decades now. But recently, corporations have started to embrace this trend even if it would disrupt the status quo. The reason, they can’t afford not to anything about it.

Several companies have recently declared bankruptcy or have started to vanish because it failed to recognize the changing landscape of the market. For instance, rental company Blockbuster would still be a major player if it recognized startups such as Netflix. This is similar to the case of Kodak. If only it recognized newbies Shutterfly and Instagram, it might have averted declaring bankruptcy.

Fortunately for some companies, they still have time to catch up with the situation. Nielsen, for instance, has already allotted money to fund small investments. Dell is doing the same, maintaining that it will continue investing in startups even with plans for it to be taken private.

Corporate venture capital allows public company to focus on the long term. For instance, American Express Ventures will participate in merger of e-commerce and payments industries. It is also looking for new technologies that could be utilized for the next decade.

If you are an owner of a business startup who is in need of capital, then it is a good idea to look for venture funds from corporations. Securing one would be a good thing, especially since big companies could assure a successful future for your business startup.

03/21/201306/28/2017

3 common pitching mistakes of business startup owners

Securing funds from venture capitalists or angel investors is one of the most difficult tasks of business startup owners. Not only do they need to convince potential investors that they will benefit from the deal, they are also tasked to convince them to believe in the potential of their ideas.

Venture capitalists and angel investors are experienced when it comes to choosing which startups to fund. Most of the time, they know how to separate the entrepreneurs who lack the ability to run a viable business to those who are made to be successful. In order to avoid falling into the first category, business startup owners should avoid committing these obvious pitching mistakes:

Asking for a non-disclosure agreement

While it is understandable that you wanted to protect your ideas, asking your potential investor to sign an NDA on your first meeting is a major turn-off. Unless you have patented algorithms or formula that could be considered as your intellectual property, you have to realize that NDAs do not have much value in the business startup world. Keep in mind there are hundreds of other people out there who might have been thinking the same way as you do.

Asking your potential investor to sign an NDA is a sure way to shoo them away as it inserts a level of untrust worthiness in your supposed partnership.

Talking about equity splits

Opening your pitch with the idea of equity splits at early stage may turn away a lot of potential investors. Of course, it’s important to deal with agreements and percentage points, among others. However, talking about this too much instead of focusing on the product and other more relevant things would surely upset your potential investor.

Determining who will be the CEO is important, but spending all your time arguing the pros and cons of appointing one is futile, especially for business startups that have yet to establish a name for itself.

Failing to present a financial plan

Investors want to know how they will benefit from a deal. So a good business startup owner is expected to present a financial plan detailing how is he or she planning to gain revenue. Be realistic, a business without a detailed financial plan is not a business.

03/01/201306/28/2017

Things to Do When Raising Capital for Business Startups

Business startup owners often have a hard time securing investments from angel investors or venture capitalists. This reality, however, should not discourage entrepreneurs from seeking capital from potential investors.

The truth is, while it is difficult to secure financial support from these people, it’s not impossible to get the money that could boost the capacity of one’s business. Here are five things that could help business owners secure support from angel investors or venture capitalists:

Stop talking, start working

With the number of available tools out there, business owners are now capable of producing prototypes of their products even with a small budget. So instead of just presenting your thoughts using a PowerPoint presentation, you must allot some time and money producing an early version of your product.

These days, angel investors and venture capitalists prefer business owners who “show” their ideas rather than talk about it in front of the potential investors.

Expand your network

Securing referrals from established entrepreneurs can boost your chances of getting the attention of potential investors. With the number of startups seeking for financial assistance in the market, many investors are not paying attention to requests which are not referred by people whom they are acquainted with. Because of this, any entrepreneur who wants to secure capital for his or her startup should expand his network and get referrals from the right people.

Learn the market

Before approaching a potential investor, a business startup owner must first understand the market that he or she intends to work with. Understanding the business landscape, including your competition, will give you insights on how would you present your business to angel investors or venture capitalists.

Choose a long-time investor

A lot of entrepreneurs prefer having a lot of people investing on his or her startup. And while this is usually a good indicator of the status of the business, owners must also understand that many of these investors might choose leave the company after a few months of partnership. This could be disastrous, especially if no one from your pool of investors would stick around with you. In searching for capital, therefore, business owners must look into the possibility of getting investors who are really interested in sticking with the business for a long time.

Understand your investors

Finally, the business owner must try to understand the desires of his potential investor to boost his chances of securing investments. Some angels or VCs might want short sales cycles or a payout after a few years of partnership.

01/21/201306/28/2017

Seven Tips on Raising Venture Capital for Business Startups

Raising Venture Capital for a business startup may be one of the most difficult challenges that an entrepreneur might encounter. After all, with the number of business startups out there, the competition for that precious venture capital may be really tough.

Here are some tips for business startup owners seeking to raise venture capital:

Decide on what you want to do – Having a business idea is different from having a business plan. While it is important to know what you want, you also need to know how you would execute your plans to achieve your objectives. Knowing this will increase your chances of securing venture capital.
Be ready for what happens – If you’re really serious with securing a venture capital, then you have to do whatever it takes to get it. This includes being ready to move to another location or sit in on trainings and other experience-building activities.
Invest on your team – The truth is, businesses are not just about its owners. Usually, the success depends on the entire team that is working behind it. Venture capitalists know this, so do your best to establish a team that would bring your startup to the top.
Find a mentor – Business startup owners usually don’t have much experience on what they are doing. With this, it is necessary to have a mentor who could help you in your operations, as well as in getting recommendations that would help you in seeking investors.
Have fun – Venture capitalists like business startup owners who enjoy what they are doing. The success of the business greatly depends on the passion of the people who runs it, so try to enjoy and have fun with your day to day activities. Keep in mind, though, that too much fun may lead to failure, rather than success.
Be ready to fail – Failing to secure a business investment is a common occurrence in the world of entrepreneurship. In case you get turned down, don’t worry, there are other opportunities out there.
Know what you are doing – Finally, know that venture capitalists prefer business owners who know everything about their craft. Therefore, before seeking financial support from venture capitalists, try to know everything about what you are doing in order to convince them that their money will be in safe hands.

12/03/201206/28/2017

Educate Your Investors: Effective Ways to Secure Business Funding

Securing the nod of potential investors such as angel investors or venture capitalists is not an easy job. Most of the time, they have the money but they are not familiar with the industry that your working for. Prior to pitching your startup, it is important that you have some idea on how you will respond to the queries of your potential investors.

Be ready to answer questions such as: What is the scope of your industry? Why should I invest in your company? How much will I get when I fund your business? What is your edge over other companies?

Being prepared to answer such questions will greatly improve your chances of securing business funding. The key is simply to make the investors understand your industry and where you are coming from. If you do that, there is no doubt that you will be able to get the venture capital that you really need.

Aside from being able to respond to the questions thrown at you, you should also try to observe the following tips on how to effectively educate your potential investors about your industry:

1. Explain your industry in a familiar manner – It is important that your potential investor understands your industry. And you can only do that by explaining it to him or her using a familiar context. For instance, if your industry is something that concerns e-commerce, then you might want to explain it by using a relatively known concept such as trade or marketing.

2. Avoid jargons – When talking about a concept that we are knowledgeable of, Continue reading “Educate Your Investors: Effective Ways to Secure Business Funding”

08/29/201206/28/2017

Need Funds? 6 Steps In Applying For A Venture Capital

If you are planning to establish your own startup, one of the first things that you have to do is to secure financial support. One way to do it is to apply for a bank loan. Another – and the more popular one – is to seek support from venture capitalists.

Because of the competition, getting an approval from a VCs is not that easy. However, with the amount of available funds out there, it’s never impossible to get one – if you know what to do.

Everyone agrees that in the process of getting financial support from VCs, the most important moment is the time when you make your pitch to your potential investors. And while you have to pay a lot of attention to this particular occasion, you must also keep in mind that most of your time will not be spent on the actual pitching – it will be on the preparation.

Like baseball pitchers, entrepreneurs who want to secure investments should spend more time preparing for the pitch than the actual pitch itself. Following is a step-by-step preparation process that aims to assist entrepreneurs who seek funding from venture capitalists:

Step 1: Look for Specific Partners

Instead of just looking for investment firms, entrepreneurs should focus their time identifying specific venture partners. Despite working at the same investment firm, partners usually differ in terms of operations, capabilities, and expertise. Some investors, for instance, prefer startups focusing on electronics or health-related services, among others. Knowing this will save you a lot of time.

One way to help you in your research is to speak with other entrepreneurs who recently closed investment rounds. They can give you information regarding not just the firms but also the specific venture partners.

Step 2: Get to Know Your Potential Investors

After identifying a number of potential investors, learn how they operate. It is not advisable to immediately approach them and ask for funds – it’s a one way ticket to rejection. What you must first do is to get to know them and, if possible, get them to know you.

You can connect with them through social media accounts. Follow them on Twitter and check their Facebook presence. You can get their attention by providing insightful and interesting comments on some of their posts. Keep in mind, however, that you have to do this moderately. Otherwise, you’ll be tagged a stalker with a vested interest.

Step 3: Secure Meaningful Referrals

Establishing a social media network with your potential investor is not enough to get their approval. More than that, you should get their attention by securing referrals from people they trust.

Recommendations from accountants and lawyer, while not entirely worthless, would not usually secure an investment. What you must have is a referral from an entrepreneur who is already on the portfolio of your potential venture capitalist. Getting one is difficult, but it might spell the difference between an approval and a rejection.

Step 4: Preview Your Venture First

Like what was previously stated, immediately asking for money is not a very effective move. Thus, when you get the opportunity, schedule a meeting with your potential investors and tell them that you want to preview your venture and get their insights. This will pique their interest and will assure positive reception to future meetings.

Step 5: Provide Updates and Follow-ups

Following the preview meeting, do not forget to send your potential investors with updates and follow-ups. Giving them information about the improving status of your startup will act as a signal that will entice them to forge a partnership with you.

Step 6: Initiate Fundraising

Finally, when you have finished the first five steps, coordinate with your potential venture capitalists and ask them for possible investments. This step should not be very difficult especially with all the information and recommendations that you have previously gathered.

Following the six steps would take a lot of time. But it will assure you that when you return to running your business, you have secured that elusive investment that you really need.

More detailed information and useful advice can be found at www.funded.com Created by Mark Favre, it offers expertise and assistance with developing and funding your concept, including a private forum for queries and discussions. If you need access to investors and funding providers, please do check our website.

08/17/201206/28/2017

Is It Time To Apply For A Startup Accelerator?

Following the rise of startup accelerators, the number of new entrepreneurs who want to get a position within these incubators has also significantly increased. Wall Street Journal reports that the applications to more than 200 accelerators around the world have almost doubled in the past two years.

According to Marc Nager, Chief Executive Officer of Startup Weekend, an accelerator may be good for those who are new on the field of entrepreneurship. However, in isolated cases, some of the terms may not be as acceptable. Nager provided some information that might help those who have yet to apply for an accelerator.

Understand the Basics

For Nager, would-be entrepreneurs must start with understanding the basic terms of the deal. He said that before applying, they should look at the benefits that they will get once they participate in this venture.

In the world of startup accelerators, a lot of value will come from the network that will be established amongst the students, mentors, and program leaders. Nager added that the applicants should also use to their advantage the possibility of having one-on-one experience with experienced entrepreneurs. He stresses the need for applicants to identify at least three mentors who have had experience on the industry that they are working on. This will ensure that the sessions will be maximized and will result in a highly beneficial experience.

Choose Wisely

Nager advises that when applying for startup accelerators, would-be entrepreneurs should consider signing up in well-known programs. He said that these will ensure better results that will be advantageous for the participants.

Unfortunately, well-known start-up accelerators usually have very low acceptance rates. With this, applicants can also try signing up in local versions of the accelerators provided that they have high quality program, mentors, and leaders.

Nager also noted the rise in the number of accelerators that offer specialized programs. There are those that focus solely on providing programs that help healthcare startups, civic startups, and startups that use a specific technology, among others.

The specialization may be advantageous for some startups. However, it must be noted that there are also things that one may miss if he or she decides not to sign up in one of the traditional accelerators that offer a wider range of coverage. Because of this, would-be applicants should know how to weigh the benefits before deciding to participate in specialized programs.

Work on that Application

As stated, the chances of getting admitted into a well-known accelerator are very slim. Because of this, would-be entrepreneurs should toughen up their applications if they want to get the nod of the evaluators.

One thing that they can do, Nager says, is to understand how the applications were evaluated by the accelerators. He also said that having a good team that will shine above the rest will boost the chances of getting selected.

Finally, he said that the applicants must do all their best to impress those who will decide on the applications. He suggests the use of human element, among others, to get the approval of the decision makers.

08/13/201206/28/2017

Seal the Deal: Four Ways to Ensure that You’ll Get That VC Funding

It might seem easy, but the reality is that very few startups actually get financial support from venture capitalists. In Silicon Valley, for instance, only 0.3 percent – or one in every 300 startups – receives that highly sought after funding. This is the truth, and if you are one of these hopefuls, you might want to start improving your performance to ensure that you will be the chosen one.

This article does not focus on giving usual advices that urge you to be the top performer, the cream of the crop, and the best of the best – these are very obvious things that you should already be aware of. Instead, this piece will provide you with four important tips and reminders that might help you seal the deal with your potential founders.

TIP 1: Know What You Need

Before submitting a proposal to venture capitalists, it is your duty to know all the things that you are asking for from your potential founders. How much money do you need? Is the amount that you are asking for enough to support the startup? Where will you specifically allot the money that you will get? What will the VC get in exchange of the financial support that they will give you? What will be the status of your market outbound once you receive the funding?

These are just some of the things that you should be familiar with, and the list of questions goes on and on. As the owner of the startup, you should be able to answer every possible question that venture capitalists might ask about your proposal.

TIP 2: Know What You Are Doing

Impressing your potential investors is perhaps the most important things that you should do if you want to receive financial support from venture capitalists. And how can you impress them if you cannot clearly explain the concept, objectives and other significant details about your company? As the owner, you are expected to familiar not just with the strengths, but also weaknesses and challenges that your startup is facing. This will help you when you present your pitch before your potential founders.

TIP 3: Persistence is the Key

In this kind of game, time is usually not on the side of the entrepreneur. Venture capitalists have the power to act on your proposal on whatever speed that they like. They might decide to immediately discuss your pitch among themselves or hold it for as long they want due to any type of reason that they may come up with. There is nothing much that you can do at point – that is, unless you decide that you want to give them a deadline. This might work, but you must be sure that your proposal is good enough that your potential investors would bother following the timeframe that you imposed on them.

If you do not want this suggestion, then there’s nothing that you can do but to persevere in following up your proposal. Do not be ashamed to check the status of your pitch – there’s nothing wrong about that. Just make sure that you do not nag, pester or badger your potential funders.

TIP 4: Choose your Battles

Discussing the term sheet is a serious pain in the neck. Definitely, there will be disagreements on the terms and conditions that your investors would want to enforce. You should know when to hold your ground or give in to their requests. There’s no point arguing just for the sake of argument. It would lead to a disaster. Know how to choose your battles. Too much argument may lead to a bitter relationship between you and your investors. Or worse, you might end up losing an important deal.

Venture capitalists are not different from your friends, family, and business partners who have heard you talk about your startup. They are also people. And like the rest of us, they will listen to you as long as you provide them with honest and interesting information. You do not have to use out of this world statements to amaze them. All you have to do is to give them an honest proposal that is worthy of their attention.