Added Benefits Venture Capital Brings to Your StartupJuly 31, 2014
Venture capital funding provides fast cash, but there are a number of other advantages for your company.
If your startup is in need of cash, venture capital funding could be a valuable option when trying to raise funds. If you expect to make a large profit in the next three to five years and are looking for increased cash flow, consider venture capital funding.
Is this the right decision for my company?
Before you look at the benefits of venture capital financing, be sure to evaluate if it is the most advantageous and sensible option for your business.
- Venture capital funding works best after a startup has established itself as a money-making business and expects rapid expansion in the near future.
- Seeking donations from family and friends is often the first route that companies take.
- Venture capitalists look for companies with the highest potential so that they can acquire the greatest return on their investment. This means that VCs often look for companies that have a solid business plan, have already created their product and started selling it.
What are the benefits?
Venture capital funding most obviously provides fast cash, but there are also several other advantages, including:
- Connections- The VC can provide your company with potential customers, suppliers, and employees. An experienced VC has connections that will lead your company to growth.
- Management Advice- The VC can provide your company with tips from an outside perspective on ways your company can improve operations. When beginning the process, the VC wants to see your business plan, and most importantly your potential to succeed. They will learn a great deal about your company in this process.
- Exit Strategies- The VC can give your business valuable exit strategies. The VC greatly benefits from your liquidity as they are looking for a ROI, but nevertheless they still hope to provide you with the most cost effective exit. Though the owner controls a large part of business, the VC has privileges once he/she gets involved. The VC can change management and control the company's exit.
- Future Funding- If your company benefits from the VC financing and the VC has extensive resources, the VC can potentially fund your future endeavors.
Benefits on both sides of the agreement
Though venture capital financing can be a lengthy process, it could be the right decision for your business if you anticipate widespread success in the coming years. Companies like Google and Facebook benefited greatly from VC funding after they established their companies, projected rapid growth, and required fast money to achieve that growth. Success stories like these suggest that VC funding provides benefits on both ends of the arrangement. The company receives the funding it needs, and the success of the business leads to hefty ROI for the venture capitalist. The notable advantages aside from money are important as well.
For more information on venture capital funding and deciding if it is the right choice for your business, please contact any member of the KLR Startup and Emerging Business Group.