Venture Capital

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Venture Capital

Venture capital - and why you need a business plan

Venture capital is funding offered by private equity funds (venture capitalists, or VCs) in return for a percentage share of a new business. Venture capital is usually more appropriate for firms that require a lot of equity finance, and have very high profit potential from their business plan. Venture capital investors often specialize in a particular industry sector, and aim to make their profit by sharing in the success of the business in the future (by selling their investment, or offering it on the stock market). They may also be able to offer significant financial and management expertise, thus adding credibility to your venture. They will not invest venture capital funds unless they are convinced your business plan has a good chance of making a significant profit. A venture investor may or may not wish to take an active part in the running of your business: but they will certainly wish to share in the profit!

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There are disadvantages involved, of course, such as the fact that gaining venture capital can be an exceedingly long, costly and stressful process. Also, a VC may have very stringent requirements for speedy profitability, which may not be your own aims for the venture. If the worst happens and the business fails, then venture capital investors will (naturally enough) protect their own investment before your business.

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Raise Venture capital: how to find the venture funding you need

It's true that the Internet holds a wealth of resources concerning venture capital. There is even a National Venture Capital Association. However, all the research in the world can only get you so far. Sooner or later, you're going to have to put together a business plan to approach a venture capitalist. When that moment comes, you'll need all the help you can get. So here are a few very brief pointers to raising venture capital:

Most venture capitalists look at eight to ten business plans for every entrepreneur they meet, and many business plans are rejected unread since they don’t meet particular investment criteria, or they’re in a sector the VC wishes to avoid. Much will hinge on how credible you and your business plan is.

The venture investor needs to be convinced that your business has the potential for sustained growth, and that you and your management team have the ability to make it happen. If you get short-listed, there follows a detailed appraisal of your proposal. If you get this far, you have a much better chance of securing venture capital.

The process of seeking venture capital can be a minefield. The venture capital investor will seek to maximize their own advantage, and this can leave you in a position you are not comfortable with. Also, when turning over your business plan to professional consultants, there is a danger that you will lose control of your own idea. Accountants and management consultants can focus so much on cash-flow, budgets, etc, that the focus may wander away from you, the entrepreneur. That's one reason why it's so important to select consultants who will respect your part in the whole process.

Here at HJVentures, we have a great deal of experience in all aspects of writing business plans to raise venture capital. Our expertise can make you stand out from the pile on an investor's desk. We know how to coax out of you the vital information that could make or break your business plan. Please contact us, or call us at 877-334-4780, or email us at venture-capital@HJVentures.com if you have any questions on business plans or raising venture capital.

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