| ign="center"> | | | | capital firm may beinterested. |
| You may publish this article in your ezine, newsletter | | | | However, some firms prefer a later stage of new |
| onyour web site as long as the byline is included and | | | | businessdevelopment, perhaps when the new |
| thearticle is included in it's entirety. I also ask that | | | | company is in its secondor third round growth state |
| youactivate any html links found in the article and in | | | | and needs more capital eitherto carry out expansion |
| thebyline. Please send a courtesy link or email where | | | | plans or to tide it over until amerger or public offering |
| youpublish to: The Most overlooked Principle to | | | | carries it to the next stage ofcorporate growth. |
| getting Venture capital | | | | A company's business plan serves as the primary |
| By Abe Cherian | | | | analyticaltool for the venture capitalist. In analyzing |
| Copyright © 2005 | | | | the plan, aventure capital firm would most likely focus |
| Venture capital is a possible source of funding for | | | | on threefeatures. |
| newrelatively unproven enterprises that appear to | | | | The product or service. Investors seek product or |
| havepromising futures. However, such money is | | | | serviceinnovations that give the company a strong |
| often hard tocome by. | | | | competitiveadvantage. A new idea, backed by |
| Be realistic in your quest for venture capital. | | | | market surveys (measuringthe appeal of the product |
| Venturecapital firms expect a business to be able to | | | | or service and its potentialmarket) may be tempting |
| return theirinvestment not only with interest, but | | | | to such investors. Managementcapability. |
| with a large profit. | | | | No matter how good the product or how innovative |
| Many venture capital firms are affiliated with | | | | theservice, the quality and experience of the |
| banks,insurance companies, other financial institutions | | | | management is akey factor in the success of the |
| and largecorporations. | | | | business. |
| Some are owned by individuals or private groups | | | | The astute investor is well aware of this and looks |
| ofinvestors and a few are publicly held. Once you | | | | forsolid evidence of such skill. The industry's growth. |
| acceptventure capital, you have relinquished some of | | | | Investors also want to be sure that the product or |
| yourautonomy and accepted the understanding that | | | | serviceis in a growth field. A significant or |
| the venturecapital firm will take a large share of the | | | | revolutionaryproduct improvement, by itself, may not |
| profits youearn. | | | | have appeal in adeclining product or service category. |
| As an entrepreneur, you should understand the | | | | Most venture capitalists purchase common or |
| nature of avendor firm, before pursuing this as a | | | | convertiblestock rather than burden the fledgling |
| financing source. | | | | enterprise withinterest payments on debt or |
| This type of investor expects a projected return | | | | debentures. They may possiblywant more than 50 |
| oninvestment that is directly related to risk. The | | | | percent ownership. |
| greaterthe risk, the greater the return expected. | | | | Additionally, while the venture capitalists may insist |
| Typically however, an investment firm will not | | | | onsitting on the Board of Directors or offering |
| beinterested in getting involved with a new firm until | | | | managementand technical advice, they are rarely |
| thebusiness has established itself in some way, so | | | | interested in theday-to-day management of the |
| the riskfactor can be determined. | | | | business, unless its survivaland their investment is at |
| The venture capital firm and its interest usually | | | | stake. |
| dependsupon the stage of the new firm's | | | | Keep in mind that the minimum investment is |
| development. Once the newfirm has established itself | | | | generally from |
| and has a workingorganizational structure, a viable | | | | $50,000-$500,000, but investment ceilings are |
| business plan andstart up arrangement, a venture | | | | almostunlimited. |