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In the business world, venture capital is a highly sought-after commodity – outsiders willing to invest their own money into a growing company in exchange for equity or other compensation. It is not technically a loan, so many businesses see it as a better way to obtain a cash infusion. But is it right for your firm or start-up?

The first thing to remember is that venture capitalists are really only interested in getting involved in the early stages of company growth. The chance of getting a VC to jump in at the seed money or start-up stage is extremely unlikely. According to data from PricewaterhouseCoopers, only 225 start-up companies in the entire country received funding from venture capital firms in 2013. Compare that with the 2,057 companies in their early growth phase who attracted VCs last year. The number drops off dramatically again for later phases. For those in their expansion stage, only 1,000 received VC help. The message is: unless you have a high growth business in its early period, you should probably look elsewhere than venture capital for financing.

Also important to consider before you go chasing after VCs is how much you are willing to give up to secure that cash. Even if you are not making monthly payments to the venture capitalists like you would with a loan, you will still be giving up equity or may have to tie your company permanently to those particular investors. Is that an arrangement with which you can be comfortable? Are you looking for investors who will give you advice on how to run your business?

If venture capital does not turn out to be the best thing for your firm, don’t underestimate the value of bootstrapping and small business loans. Most of the nation’s businesses get started with personal investments and a willingness to network.


Search for Small Business Loan Sources and receive your matched lender list
AND received FOUR free Business eBooks worth $39.95!
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