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Business Plan InformationFinding a Venture Capital Firm
by:
Dave Lavinsky
Many an ventures are janus-faced with the challenging task of raising venture capital. The 1st part of this process is finding the right venture capital firm (VC). Spell this may seem simple, it isn’t. There are thousands of venture capital firms in the United States alone, and going after the wrong ones is one of the most common reasons why companies fail to raise the capital they need.
When seeking a venture capital firm, there are six key variables to consider: location, sector preference, stage preference, partners, portfolio and assets.
Location: most venture capital firms only invest inside
100 miles of their office(s). By investment close to home, the firms are able to much actively get involved with and add value to their portfolio companies.
Sector preference: many an venture capital firms focus on specific sectors such as healthcare, information technology (IT), wireless technologies, etc. In most cases, even as if you have a great company, if you fall outside of the VC’s sector preference, they’ll pass on the opportunity.
Stage preference: VCs tend to focus on several stages of ventures. For instance, several VCs prefer early stage ventures wherever
the risk is great, but so are the potential returns. Conversely, several VCs focus on providing capital to firms to bridge capital gaps before they go public.
Partners: Venture capital firms are comprised of individual partners. These partners do investment decisions and typically take a seat on each portfolio company’s Board. Partners tend to invest in what they know, so finding a partner that has past activity experience in your industry is really helpful. This relevant experience allows them to much fully understand your venture’s value proposition and gives them confidence that they can add value, thus encouraging them to invest.
Portfolio: Simply as you should seek venture capital firms whose partners have experience in your industry, the ideal venture capital firm has portfolio companies in your field as well. Portfolio institution management, since they are industry experts, often advises VCs as to whether the institution in question is worthwhile. In addition, if your venture has potential synergies with a portfolio company, this importantly
enhances the VCs interest in your firm.
Assets: Most companies seeking venture capital for the 1st time wish require future rounds of capital. As such, it is helpful if the VC has “deep pockets,” that is, enough cash to participate in follow-on rounds. This wish save the institution significant time and effort in maintaining an adequate cash balance.
Finding the right venture capital firm is utterly
critical to companies seeking venture capital. Success results in the capital required and significant assistance in growing your venture. Conversely, failing to find the right firm often results in raising no capital at all and being unable to grow the venture.
Simply about the author:
GT Business Plans has developed over 200 business plans for clients that have put together raised over $750 million in financing, launched many
new product and service lines and gained competitive advantage and market share. GT Business Plans is the sister site of GT Venture Capital
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