PLANS.TOPIC: 371 Venture Capital Firms
Vincent C. Ragland is CEO of PLANS. PLANS can be reached at (312) 286-6886 and by Email at Vncnt599@sbcglobal.net.
.com 45 years of serving the Black community
If you are a new business seeking capital it is likely that you have inquired about venture
capital and venture capital firms. Venture capital represents an avenue for accessing
cash via a venture capital firm, providing funding for small businesses that show an ability to generate a profitable return on investment. Funding can range from the hundreds of thousands to
millions. The Venture Capitalist is an experienced money manager interested in investing in your company for maximum return and profit. Your business model will be evaluated to determine if it is a needed business or just a convenient business, meaning the degree of need for your business outweighs the convenience of the product or service you are providing. All venture capital firms are not alike. Some firms will not invest in start-up companies, preferring to see the business establish itself first before providing investment capital. In funding established or middle stage companies the risk inherent to the venture capital firm is reduced. Other firms may invest in a start-up/ early stage companies but will require a strong business plan and proven organizational structure, prior to investing. Also, the venture capital firm may take a larger ownership interest in the company or some management interest. Day to day management
interest is rare unless the venture capital firm feels their investment is at risk. For the venture capital firm the level of investing is all based upon risk vs return. The greater the risk, the greater the expected return.
To get the attention of a venture capital firm the small business must organize and document their business model. The first thing the small business needs is a comprehensive business plan. The plan must outline the ability the company shows to generate revenue and provide a positive (ROI) return on investment. Next the product or service offered by the business must be needed, innovative and create a strong competitive edge for the company. The basis for the need of the product or service must be backed by market research and documentation. This further solidifies the small business concept and makes it more appealing to the venture capital firm.
The management team is critical to success of the small business. Therefore the venture capital firm evaluates the management team to determine their experience, professionalism, integrity, and understanding of the business and industry.
When making a presentation to a venture capital firm the business should prepare its business
plan, with all financial tables, assumptions and research information, a PowerPoint presentation
with accompanying hard copy and white papers and supporting documentation.
Often venture capital firms purchase common stock of the company or take an ownership interest in the company depending upon the amount of their investment. It is advisable not to allow a venture capital firm to own fifty (50%) percent or greater interest in the small business, allowing
the small business to maintain ultimate control of the company.
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