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Rhode Island Legal Blog

Monday, May 29, 2017

Obtaining Venture Capital

It is no secret that it takes money to make money.  Not all business owners have the money they need to get their ventures off the ground and therefore many require financing. 

Venture capital is a type of financing that is different from the financial support a business would customarily obtain from other lenders.  Venture capital is usually reserved for businesses that have high growth potential but also involve high risk.  Most of the time, these investments are unsecured and are in exchange for a stake in the business or a management role.  Venture capitalists often want to be involved in the operational matters relating to the business and this type of relationship might not be right for all organizations.  In many instances, small start-ups and those involved in the technology field obtain venture capital to get their businesses up and running.

While venture capital is not as common as traditional forms of financing, it can certainly give a business the boost it needs to become successful.  This type of financing is not as easily obtained as other forms and a business interested in it must have the right approach.  The business must be based on a unique idea that is not available in the current market.  Investors want to know that there is a need for the product and that there will be demand.

Business owners seeking venture capital must also have a comprehensive business plan that provides as much detail as possible.  The business plan should include industry considerations, factors that can propel the business or that may become an obstacle, and of course, financial information.  The financial overview should include information from the past (if applicable), present and future projections.  Venture capitalists want to have confidence that the business will be successful and nothing says that like past performance.  If people have already paid for the product, investors want to know that.  Therefore, this information should be included and highlighted in the financial portion of the business plan.

Those seeking venture capital should also use all of the avenues available to them to build a network including face to face interactions and online communities.  For many investors, the team that is proposing the investment is of the utmost importance.  Business owners should seek to surround themselves with dedicated individuals that work well together and have the ability to evolve or adapt as the company grows if they want to attract venture capital.

If you are seeking venture capital or are in need of an attorney to negotiate or handle the formalities involved in an investment, contact us today.


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