Friday, 4 July 2014

How A Startup Can Benefit From A Venture Capital Firm?



Venture Capital Firms
Raising capital through venture capital funding is a deciding factor for any startup. You have to be highly sure about what exactly you want. Either you can choose to be your own boss or if you want to earn huge profits, you may have to share your ownership with an investor. Well, there’s no denying the fact that venture capital firms can immensely benefit your startup as there are solid examples like Google, Twitter and Facebook who wouldn’t have been able to rise to the present position had they not entered into a partnership with such firms. So once you are assured that you have a unique idea, a great business plan, a highly organized management team and most importantly, you are ready to share some of your responsibilities in your company, you can definitely think about venture capital funding.

Here are a few ways in which the venture capital firms can benefit your startup. 

  •           You Get Access To The Much-Needed Money

There are many other methods of startup funding. You can use your personal savings, ask your friends and family, your employees or you can go for other sources like incubators, angel investors and crowdfunding. But, nowhere will you be able to raise as much fund as with venture capital funding. These firms have plenty of resources but they would only invest if they find the growth potential in your startup. So with a unique idea, it’ll be much easier for you to convince these investors and get access to the much-needed resource for the growth and expansion of your company.
  •           You Get Access To Many Value Added Services

Venture capital firms typically prefer to invest at the seed stage. Now, this is certainly a high-risk investment so the VC firms always make sure that they provide the startups with as many facilities as possible so that it can run smoothly and efficiently and start earning profits within the expected period.  The firms offer a wide variety of value added services like mentoring, alliance and exit facilities.
  •           It Increases The Value Of Your Startup

The value of a business has a lot to do with its future fund raising campaigns. The higher the worth of your business, the easier it is to convince an investor at a later stage. And if you have the venture capitalists investing in your startup, there’s simply nothing like it as the value of your business automatically goes up with such influential people interested in your business.
  •           You Get Access To Guidance And Mentorship

Venture capitalists are usually experts in the field of finance, marketing and management. They may not have an exact knowledge of your business or the industry you are dealing with but they can definitely assist you through proper guidance and mentorship in the matters of finance and marketing. Once they invest in your company, they become actively involved in all the important matters of the company and are always there to give a sound opinion. They also offer valuable ideas so as to help you build a strong business strategy. Now if you find this as interference, you have to plan it right from the beginning so that you don’t end up messing the partnership with your potential investors.

Conclusion

These are some of the most important advantages of approaching the venture capitalists.  This method of startup funding is more beneficial if it is a newly started business.  The fund you receive will enable you to execute the expansion plan which is critical at this stage of your company’s growth. Moreover, with this type of startup funding, you don’t even need to sell your equity although the investors provide you with alternate funding options. So you always have a choice – either you receive the money as a debt or you can sell your equity to minimize your risk of loss. You can even buy equipments or office space for your startup with the money provided by the venture capitalists.


However, you still have to remember two most important things – firstly, this type of funding is not meant for everybody and secondly, make sure that you choose the right investor with proven track records and industry relevance.



For more information on venture capital funding, feel free to visit us at mergeralpha


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