If you’re looking to start a small business, obtaining bank loans can be a virtually insurmountable process if your credit isn’t up to par. As such, there are many available alternatives – among them being venture capital. To mitigate the risk, the venture capitalist (either a single person or financial institution) will assume equity in your business in exchange for the funds they release.
The Mechanism Behind Venture Capitalism
This method of small-business and start-up funding is so pervasive that actual Venture Capital firms have sprung up to meet the demand. It is tailor-made for business ventures that may be deemed too risky for banks or traditional lending vehicles. The recompense comes in the equity the firm takes. Giving the investor a chance to grow their value along with the company’s success.
Venture Capital: How to Hit the Ground Running
You’ll want to have all your chips in order before you seek this type of funding. Then, you can approach a liaison with connections to a venture capitalist, since these things only viably happen via introduction. The liaison will be an expert at presenting your proposal the right way to maximize your chances of piquing the interest of the venture capitalist.
From this point, if there is any interest in your product/service, the venture capitalist or her representative will call you – not the other way around. The next stage involves you meeting them and making your proposal/pitch deck – which is just a presentation. After which you’ll meet the person or the team with the funds. You will receive a term sheet either there or in the mail shortly after this meeting. Which is a non-binding agreement with the funding offer and associated terms.
Closing Out the Deal
The venture capitalist must, of course, take some time to perform due diligence and investigate your start-up. Since a lot of money is about to exchange hands. If all goes well, then you’ll receive offering documents outlining the amount of funding tendered, as well as the amount of equity they desire. You can, from here, choose whether to accept or decline the deal.
Contact Crimson Stone Capital solutions for more information on the venture capital process.