Venture capitalists typically invest in companies that have already started their business and have proven their concept with some initial success but need additional scale-up funding to expand their business further.
One of many business funding options, venture capital involves looking for companies that have the potential for considerable growth and are ready to take their business to the next level.
Through getting venture capital funding, you can quickly grow your business, helping you do all sorts of things like expand your operations or reach more customers.
Getting venture capital funding can also connect you to investors who provide valuable advice, mentorship, business expertise, and access to their own network of contacts.
Venture capitalists often understand the challenges of startups, provide valuable insights and focus on growth.
Venture capitalists may require a larger equity stake in your business than an angel investor for a small business.
This means potentially losing a greater portion of control or the ability to make key decisions on strategy for business growth.
They also usually expect to sell their ownership to someone else in the future, which may clash with your vision and goals.
To secure venture capital start-up funding, you will need to be willing to give up a stake in your business.
Venture capitalists also look for more established businesses with a strong and scalable business model, a significant market opportunity and a competitive advantage that sets them apart from the rest.
They also look at the management team's expertise, passion and ability to deliver the business plan successfully.
Whilst there will always be exceptions to this, an equity stake of between 10% and 25% would be a reasonable expectation for an early-stage investment.
With a capable, experienced management team, it might well be that an investor can take a back seat and simply observe and monitor progress from a distance. However, where the management team is less experienced, the investor might feel the need to provide support or indeed, be asked to provide support. Most investors have experience in building companies and there is no doubt that early-stage businesses can benefit from this insight. An experienced investor will have also developed a network of valued contacts able to be brought in to provide specialist services across a wide range of disciplines.
Examples of support an investor might be able to provide or introduce are provided below:
If you’re considering venture capital start-up funding, get in touch with us today. One of our specialists will be able to advise you on how to get started with tailored advice for your business.
The content and materials featured or linked to are for your information and education only and are not intended to address your personal or business requirements.
The information does not constitute financial advice or recommendation and should not be considered as such.
SimpliFi is not regulated by the Financial Conduct Authority (FCA), its authors are not financial advisors, and it is therefore not authorised to offer financial advice.
Always do your own research and seek independent financial advice when required. Any arrangement made between you and any third party named or linked to or from the site is at your sole risk and responsibility.
SimpliFi assumes no liability for your actions.
