More time is wasted chasing venture capital than any other type of financing. These investors are looking for huge returns not just good ones. Venture capital is extremely hard to get and the competition is fierce. These funding sources get thousands of requests each year and only invest in three or four.
The managers who invest these funds are experts at finding the very best deals. They are looking for projects that are National or International in scope, that have a minimum of $25 million dollar annual revenue potential, and proven successful management teams. Most Venture Capitalists won’t talk to you unless you come from a trusted source and are highly recommended. A great number of VC deals come from Angel Investors, Law Firms, or Accounting Firms.
If you really want VC money then find individuals who are well connected in the VC community and get them to personally invest in your business. Then get them to help you build a "Captain of Industry and Investment" board of directors. Then you might be ready to present your ideas to the VC community.
99.9% of the time seeking Venture Capital is a waste of your valuable time, but if you won’t take my advice then you need to really do your homework. I have written another book just about Venture Capital called "The Art and Science of Obtaining Venture (or Angel Investor) Capital", which is also available at BusinessFinance.com. Please download and study it before you attempt this.
Joint Ventures/Strategic Partnerships
My personal favorite. This is where two companies with parallel interests get together based on their mutual needs:
Do your homework. Seek out companies with parallel interests to your own. You have the world’s best new phone design and they are AT&T. This requires much more research than simply asking for a loan. Most of these partners will settle for 20% to 30% equity in your company. Be careful to protect your ideas by having any potential partners sign a non-circumvention agreement.
A tremendous resource, but the paperwork can be tiring. This is a great place to look. The SBA has many different programs. Your local bank should have an SBA loan officer who can explain them to you. If you need less than $50,000 the SBA programs probably aren’t for you. Check http://www.sba.gov for the latest SBA programs.
These firms leverage their private capital into government money to form a sort of venture capital fund. Most SBICs are part of commercial banks. They offer both long term loans and equity participation. They are conservative investing mainly in established companies for management buyouts, funds to go public, strategic partnerships and bridge financing.
This is a short term debt instrument typically issued from 2 to 270 days. An issue is normally a promissory note that is unsecured and discounted from its face value. The issue is usually backed by a letter of credit or some other from of credit guarantee. The company may pledge assets to obtain a credit guarantee which is then leveraged into an issue of commercial paper.
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