1. Ease of obtaining financing
It commonly takes less time to receive funds from an angel investor, as obtaining venture capital funds is a highly rigorous process. Therefore, your business should meet all the investment criteria before being considered by a venture capital firm. The difficulty with angel investors may arise in case your business requires funding from several investors, as they could demand different terms.

2. Investment Size
The range of venture capital funding is larger than the one of angel investors. Angels act alone or in organized groups and invest their own money. Venture capital firms are corporate entities that pool money from a range of investors. Angels typically provide under $1 million, venture capitalists mostly above $1 million.

3. Stage focus
The focus of angel investors is typically the earlier or the seed stage of your start-up company. Venture capital firms focus on different stages of your business. Vc providers are much less likely to invest at the seed stage and they may provide second round financing after angels. Moreover, their purpose is to take your venture to the initial public offering stage and beyond.

4. Industry focus
Angel investors vary in investment areas and may allocate funds to a range of fields, frequently within their areas of expertise. Venture capital firms generally concentrate on emerging sectors such as technology or innovation.

5. Geographic Focus
Both business investors often prefer to invest within the vicinity of their offices. The purpose is to add management value to your company and to easily monitor all their portfolio companies.

6. Expected returns
Both angels and venture capitalists generally expect a high rate of return for their investments. Stereotypically, a venture capitalist may have higher return expectations than an angel investor.

7. Expected Control
Angel investors and vc firms are similar in that they expect a board position and possibly a consulting role. Both invest in return for an ownership stake in your company and for a certain degree of involvement, but venture capital firms will exercise even more control over your company.

8. Support and Expertise
Angel investors will more than likely provide support and advice to the start-up business. Vc firms generally possess greater expertise, as they prefer to lead ventures through successive funding stages.

9. Risk taking
A venture capitalist prefers to invest in a business that will offer security and a high return on investment. An angel is far more likely to be a risk taker and put money into a venture at the riskier seed stage.

10. Motivation
Angel investors are also motivated by the desire to see innovative ideas get off the ground and become successful businesses, whereas venture capitalists are more motivated by profit.

As you need to maximize your chances of obtaining the suitable level of financing for your start-up business and minimize the amount of time spent for that purpose, a Venture Capital Firms, Angel Investors & Private Equity Funds Directory will make a difference.

Author: Len M Williams
Article Source: EzineArticles.com
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A venture capital firm is actually a company made up of a number of businessmen and investors looking for upcoming and small entrepreneurs to invest their money on. Often referred to as private equity investors, this group of people are always on the lookout for brilliant business ideas and pitch-ins, which will give them a substantial amount of return in their investments at the soonest possible time.

When you approach a venture capital firm for whatever purpose you might have, you need to always prepare yourself before you meet them up. If you’re someone who would like to offer an investment, then you need to consider how much money you’re willing to invest and how soon would you like to get the profit out of it. Of course there will be risk involved as in a typical investment portfolio and to gauge this risk with a certain venture capital firm, you need to setup a meeting with their investors.

One of the truths in the business market is how the risk is directly proportional to one’s investment and return of investment as well. The larger the money you are willing to invest, the bigger the risk will be. The bigger the risk is, the larger the probable return on investment you can receive. The financial asset of these venture capital firms goes into the early stage capital of several small businesses and hence, your expected return will be largely dependent on how successful is the operation of that small business venture.

As one of the small business investors, you need to convince these business owners that you are interested in their business portfolio and you’re willing to give a huge amount of money as a startup investment in their business venture firm. Members of a venture capital firm have well-guarded trade secrets and if they find you trustworthy enough, they may very well treat you as one in the league.

As an entrepreneur, on the other hand, you need to sell them your business idea convincingly enough so as to invest money for your early stage capital. Oftentimes, a great business idea will be picked by reliable venture capital firms and they’d even fund a hundred percent of your startup funds right there and then. Of course they will be partaking some of your profits but given the financial circumstance, that’s the most sensible thing to do.

Business investors will typically provide funding when you may have been turned down elsewhere or if you don’t have the security to offer banks. They provide a valuable link between friends and family related finance which can’t always provide enough capital, and venture capital firms which won’t fund “modest” amounts.

Investors have a keen eye and are always on the lookout to spot the next big investment opportunity. Their primary goal is to maximise their return, so won’t be adverse to risk or taking on a more hands-on approach. Because they’ve got a share of the company and invested their own money into it, they’re motivated to make it succeed and will provide a lot more help and support than if finance was sourced from traditional avenues.

They’ll often bring their own knowledge, experience and contacts to help the business, all of which can be invaluable to its success. Many will have secured their fortune from their own business ventures, so will have a wealth of experience to offer.

Unlike a loan from a bank, finance from a private business investor can’t be repaid by a specific date or have interest charged on it. It’s usually paid in dividends, the amount of which will depend on the profitability of the business.

Business investors are looking for long-term investments that offer a high rate of return. Because they bring knowledge and experience as well as money they can be the ideal choice of raising capital, and small business ventures would be wise to consider them.

Professionally managed venture capital firms generally are private partnerships or closely-held corporations funded by private and public pension funds, endowment funds, foundations, corporations, wealthy individuals, foreign investors, and the venture capitalists themselves.

Venture capitalists generally:

- Finance new and rapidly growing companies;
- Purchase equity securities;
- Assist in the development of new products or services;
- Add value to the company through active participation;
- Take higher risks with the expectation of higher rewards;
- Have a long-term orientation

When considering an investment, venture capitalists carefully screen the technical and business merits of the proposed company. Venture capitalists only invest in a small percentage of the businesses they review and have a long-term perspective. Going forward, they actively work with the company’s management by contributing their experience and business savvy gained from helping other companies with similar growth challenges.

Venture capitalists mitigate the risk of venture investing by developing a portfolio of young companies in a single venture fund. Many times they will co-invest with other professional venture capital firms. In addition, many venture partnership will manage multiple funds simultaneously. For decades, venture capitalists have nurtured the growth of America’s high technology and entrepreneurial communities resulting in significant job creation, economic growth and international competitiveness. Companies such as Digital Equipment Corporation, Apple, Federal Express, Compaq, Sun Microsystems, Intel, Microsoft and Genentech are famous examples of companies that received venture capital early in their development.

Private Equity Investing

Venture capital investing has grown from a small investment pool in the 1960s and early 1970s to a mainstream asset class that is a viable and significant part of the institutional and corporate investment portfolio. Recently, some investors have been referring to venture investing and buyout investing as “private equity investing.” This term can be confusing because some in the investment industry use the term “private equity” to refer only to buyout fund investing.

In any case, an institutional investor will allocate 2% to 3% of their institutional portfolio for investment in alternative assets such as private equity or venture capital as part of their overall asset allocation. Currently, over 50% of investments in venture capital/private equity comes from institutional public and private pension funds, with the balance coming from endowments, foundations, insurance companies, banks, individuals and other entities who seek to diversify their portfolio with this investment class.

What is a Venture Capitalist?

The typical person-on-the-street depiction of a venture capitalist is that of a wealthy financier who wants to fund start-up companies. The perception is that a person who develops a brand new change-the-world invention needs capital; thus, if they can’t get capital from a bank or from their own pockets, they enlist the help of a venture capitalist.

In truth, venture capital and private equity firms are pools of capital, typically organized as a limited partnership, that invests in companies that represent the opportunity for a high rate of return within five to seven years. The venture capitalist may look at several hundred investment opportunities before investing in only a few selected companies with favorable investment opportunities. Far from being simply passive financiers, venture capitalists foster growth in companies through their involvement in the management, strategic marketing and planning of their investee companies. They are entrepreneurs first and financiers second.

Even individuals may be venture capitalists. In the early days of venture capital investment, in the 1950s and 1960s, individual investors were the archetypal venture investor. While this type of individual investment did not totally disappear, the modern venture firm emerged as the dominant venture investment vehicle. However, in the last few years, individuals have again become a potent and increasingly larger part of the early stage start-up venture life cycle. These “angel investors” will mentor a company and provide needed capital and expertise to help develop companies. Angel investors may either be wealthy people with management expertise or retired business men and women who seek the opportunity for first-hand business development.

Investment Focus

Venture capitalists may be generalist or specialist investors depending on their investment strategy. Venture capitalists can be generalists, investing in various industry sectors, or various geographic locations, or various stages of a company’s life. Alternatively, they may be specialists in one or two industry sectors, or may seek to invest in only a localized geographic area.

Not all venture capitalists invest in “start-ups.” While venture firms will invest in companies that are in their initial start-up modes, venture capitalists will also invest in companies at various stages of the business life cycle. A venture capitalist may invest before there is a real product or company organized (so called “seed investing”), or may provide capital to start up a company in its first or second stages of development known as “early stage investing.” Also, the venture capitalist may provide needed financing to help a company grow beyond a critical mass to become more successful (“expansion stage financing”).

The venture capitalist may invest in a company throughout the company’s life cycle and therefore some funds focus on later stage investing by providing financing to help the company grow to a critical mass to attract public financing through a stock offering. Alternatively, the venture capitalist may help the company attract a merger or acquisition with another company by providing liquidity and exit for the company’s founders.

At the other end of the spectrum, some venture funds specialize in the acquisition, turnaround or recapitalization of public and private companies that represent favorable investment opportunities.

There are venture funds that will be broadly diversified and will invest in companies in various industry sectors as diverse as semiconductors, software, retailing and restaurants and others that may be specialists in only one technology.

While high technology investment makes up most of the venture investing in the U.S., and the venture industry gets a lot of attention for its high technology investments, venture capitalists also invest in companies such as construction, industrial products, business services, etc. There are several firms that have specialized in retail company investment and others that have a focus in investing only in “socially responsible” start-up endeavors.

Venture firms come in various sizes from small seed specialist firms of only a few million dollars under management to firms with over a billion dollars in invested capital around the world. The common denominator in all of these types of venture investing is that the venture capitalist is not a passive investor, but has an active and vested interest in guiding, leading and growing the companies they have invested in. They seek to add value through their experience in investing in tens and hundreds of companies.

Some venture firms are successful by creating synergies between the various companies they have invested in; for example one company that has a great software product, but does not have adequate distribution technology may be paired with another company or its management in the venture portfolio that has better distribution technology.

Length of Investment

Venture capitalists will help companies grow, but they eventually seek to exit the investment in three to seven years. An early stage investment make take seven to ten years to mature, while a later stage investment many only take a few years, so the appetite for the investment life cycle must be congruent with the limited partnerships’ appetite for liquidity. The venture investment is neither a short term nor a liquid investment, but an investment that must be made with careful diligence and expertise.

Types of Firms

There are several types of venture capital firms, but most mainstream firms invest their capital through funds organized as limited partnerships in which the venture capital firm serves as the general partner. The most common type of venture firm is an independent venture firm that has no affiliations with any other financial institution. These are called “private independent firms”. Venture firms may also be affiliates or subsidiaries of a commercial bank, investment bank or insurance company and make investments on behalf of outside investors or the parent firm’s clients. Still other firms may be subsidiaries of non-financial, industrial corporations making investments on behalf of the parent itself. These latter firms are typically called “direct investors” or “corporate venture investors.”

Other organizations may include government affiliated investment programs that help start up companies either through state, local or federal programs. One common vehicle is the Small Business Investment Company or SBIC program administered by the Small Business Administration, in which a venture capital firm may augment its own funds with federal funds and leverage its investment in qualified investee companies.

While the predominant form of organization is the limited partnership, in recent years the tax code has allowed the formation of either Limited Liability Partnerships, (“LLPs”), or Limited Liability Companies (“LLCs”), as alternative forms of organization. However, the limited partnership is still the predominant organizational form. The advantages and disadvantages of each has to do with liability, taxation issues and management responsibility.

The venture capital firm will organize its partnership as a pooled fund; that is, a fund made up of the general partner and the investors or limited partners. These funds are typically organized as fixed life partnerships, usually having a life of ten years. Each fund is capitalized by commitments of capital from the limited partners. Once the partnership has reached its target size, the partnership is closed to further investment from new investors or even existing investors so the fund has a fixed capital pool from which to make its investments.

Like a mutual fund company, a venture capital firm may have more than one fund in existence. A venture firm may raise another fund a few years after closing the first fund in order to continue to invest in companies and to provide more opportunities for existing and new investors. It is not uncommon to see a successful firm raise six or seven funds consecutively over the span of ten to fifteen years. Each fund is managed separately and has its own investors or limited partners and its own general partner. These funds’ investment strategy may be similar to other funds in the firm. However, the firm may have one fund with a specific focus and another with a different focus and yet another with a broadly diversified portfolio. This depends on the strategy and focus of the venture firm itself.

Corporate Venturing

One form of investing that was popular in the 1980s and is again very popular is corporate venturing. This is usually called “direct investing” in portfolio companies by venture capital programs or subsidiaries of nonfinancial corporations. These investment vehicles seek to find qualified investment opportunities that are congruent with the parent company’s strategic technology or that provide synergy or cost savings.

These corporate venturing programs may be loosely organized programs affiliated with existing business development programs or may be self-contained entities with a strategic charter and mission to make investments congruent with the parent’s strategic mission. There are some venture firms that specialize in advising, consulting and managing a corporation’s venturing program.

The typical distinction between corporate venturing and other types of venture investment vehicles is that corporate venturing is usually performed with corporate strategic objectives in mind while other venture investment vehicles typically have investment return or financial objectives as their primary goal. This may be a generalization as corporate venture programs are not immune to financial considerations, but the distinction can be made.

The other distinction of corporate venture programs is that they usually invest their parent’s capital while other venture investment vehicles invest outside investors’ capital.

Commitments and Fund Raising

The process that venture firms go through in seeking investment commitments from investors is typically called “fund raising.” This should not be confused with the actual investment in investee or “portfolio” companies by the venture capital firms, which is also sometimes called “fund raising” in some circles. The commitments of capital are raised from the investors during the formation of the fund. A venture firm will set out prospecting for investors with a target fund size. It will distribute a prospectus to potential investors and may take from several weeks to several months to raise the requisite capital. The fund will seek commitments of capital from institutional investors, endowments, foundations and individuals who seek to invest part of their portfolio in opportunities with a higher risk factor and commensurate opportunity for higher returns.

Because of the risk, length of investment and illiquidity involved in venture investing, and because the minimum commitment requirements are so high, venture capital fund investing is generally out of reach for the average individual. The venture fund will have from a few to almost 100 limited partners depending on the target size of the fund. Once the firm has raised enough commitments, it will start making investments in portfolio companies.

Capital Calls

Making investments in portfolio companies requires the venture firm to start “calling” its limited partners commitments. The firm will collect or “call” the needed investment capital from the limited partner in a series of tranches commonly known as “capital calls”. These capital calls from the limited partners to the venture fund are sometimes called “takedowns” or “paid-in capital.” Some years ago, the venture firm would “call” this capital down in three equal installments over a three year period. More recently, venture firms have synchronized their funding cycles and call their capital on an as-needed basis for investment.

Illiquidity

Limited partners make these investments in venture funds knowing that the investment will be long-term. It may take several years before the first investments starts to return proceeds; in many cases the invested capital may be tied up in an investment for seven to ten years. Limited partners understand that this illiquidity must be factored into their investment decision.

Other Types of Funds

Since venture firms are private firms, there is typically no way to exit before the partnership totally matures or expires. In recent years, a new form of venture firm has evolved: so-called “secondary” partnerships that specialize in purchasing the portfolios of investee company investments of an existing venture firm. This type of partnership provides some liquidity for the original investors. These secondary partnerships, expecting a large return, invest in what they consider to be undervalued companies.

Advisors and Fund of Funds

Evaluating which funds to invest in is akin to choosing a good stock manager or mutual fund, except the decision to invest is a long-term commitment. This investment decision takes considerable investment knowledge and time on the part of the limited partner investor. The larger institutions have investments in excess of 100 different venture capital and buyout funds and continually invest in new funds as they are formed.

Some limited partner investors may have neither the resources nor the expertise to manage and invest in many funds and thus, may seek to delegate this decision to an investment advisor or so-called “gatekeeper”. This advisor will pool the assets of its various clients and invest these proceeds as a limited partner into a venture or buyout fund currently raising capital. Alternatively, an investor may invest in a “fund of funds,” which is a partnership organized to invest in other partnerships, thus providing the limited partner investor with added diversification and the ability to invest smaller amounts into a variety of funds.

Disbursements

The investment by venture funds into investee portfolio companies is called “disbursements”. A company will receive capital in one or more rounds of financing. A venture firm may make these disbursements by itself or in many cases will co-invest in a company with other venture firms (“co-investment” or “syndication”). This syndication provides more capital resources for the investee company. Firms co-invest because the company investment is congruent with the investment strategies of various venture firms and each firm will bring some competitive advantage to the investment.

The venture firm will provide capital and management expertise and will usually also take a seat on the board of the company to ensure that the investment has the best chance of being successful. A portfolio company may receive one round, or in many cases, several rounds of venture financing in its life as needed. A venture firm may not invest all of its committed capital, but will reserve some capital for later investment in some of its successful companies with additional capital needs.

Exits

Depending on the investment focus and strategy of the venture firm, it will seek to exit the investment in the portfolio company within three to five years of the initial investment. While the initial public offering may be the most glamourous and heralded type of exit for the venture capitalist and owners of the company, most successful exits of venture investments occur through a merger or acquisition of the company by either the original founders or another company. Again, the expertise of the venture firm in successfully exiting its investment will dictate the success of the exit for themselves and the owner of the company.

IPO

The initial public offering is the most glamourous and visible type of exit for a venture investment. In recent years technology IPOs have been in the limelight during the IPO boom of the last six years. At public offering, the venture firm is considered an insider and will receive stock in the company, but the firm is regulated and restricted in how that stock can be sold or liquidated for several years. Once this stock is freely tradable, usually after about two years, the venture fund will distribute this stock or cash to its limited partner investor who may then manage the public stock as a regular stock holding or may liquidate it upon receipt. Over the last twenty-five years, almost 3000 companies financed by venture funds have gone public.

Mergers and Acquisitions

Mergers and acquisitions represent the most common type of successful exit for venture investments. In the case of a merger or acquisition, the venture firm will receive stock or cash from the acquiring company and the venture investor will distribute the proceeds from the sale to its limited partners.

Valuations

Like a mutual fund, each venture fund has a net asset value, or the value of an investor’s holdings in that fund at any given time. However, unlike a mutual fund, this value is not determined through a public market transaction, but through a valuation of the underlying portfolio. Remember, the investment is illiquid and at any point, the partnership may have both private companies and the stock of public companies in its portfolio. These public stocks are usually subject to restrictions for a holding period and are thus subject to a liquidity discount in the portfolio valuation.

Each company is valued at an agreed-upon value between the venture firms when invested in by the venture fund or funds. In subsequent quarters, the venture investor will usually keep this valuation intact until a material event occurs to change the value. Venture investors try to conservatively value their investments using guidelines or standard industry practices and by terms outlined in the prospectus of the fund. The venture investor is usually conservative in the valuation of companies, but it is common to find that early stage funds may have an even more conservative valuation of their companies due to the long lives of their investments when compared to other funds with shorter investment cycles.

Management Fees

As an investment manager, the general partner will typically charge a management fee to cover the costs of managing the committed capital. The management fee will usually be paid quarterly for the life of the fund or it may be tapered or curtailed in the later stages of a fund’s life. This is most often negotiated with investors upon formation of the fund in the terms and conditions of the investment.

Carried Interest

“Carried interest” is the term used to denote the profit split of proceeds to the general partner. This is the general partners’ fee for carrying the management responsibility plus all the liability and for providing the needed expertise to successfully manage the investment. There are as many variations of this profit split both in the size and how it is calculated and accrued as there are firms.

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Author: Jason Tapolci
Article Source: EzineArticles.com
Provided by: Guest blogger

The text book answer that would be given by most B-School professors is that venture capital is a subset of a larger private equity asset class which includes venture capital, LBOs, MBOs, MBIs, bridge and mezzanine investments. Historically venture capital investors have provided high risk equity capital to start-up and early stage companies whereas private equity firms have provided secondary traunches of equity and mezzanine investments to companies that are more mature in their corporate lifecycle. Again, traditionally speaking, venture capital firms have higher hurdle rate expectations, will be more mercenary with their valuations and will be more onerous in their constraints on management than will private equity firms.

While the above descriptions are technically correct and have largely held true to form from a historical perspective, the lines between venture capital and private equity investments have been blurred by increased competition in the capital markets over the last 18 24 months. With the robust, if not frothy state of the capital markets today there is far too much capital chasing too few quality deals. The increased pressure on the part of money managers, investment advisors, fund managers and capital providers to place funds is at an all time high. This excess money supply has created more competition between investors, driving valuations up for entrepreneurs and yields down for investors.

This increased competition among investors has forced both venture capital and private equity firms to expand their respective horizons in order to continue to capture new opportunities. Over the last 12 months I have seen an increase in private equity firms willing to consider earlier stage companies and venture capital firms lowering yield requirements to be more competitive in securing later stage opportunities.

The moral of this story is that if you are an entrepreneur seeking investment capital your timing is good. While the traditional rules of thumb first explained above can be used as a basic guideline for determining investor suitability, dont let traditional guidelines keep you from exploring all types of capital providers. While some of the ground rules may be changing your capital formation goals should remain the same: entertain proposals from venture capital investors, private equity firms, hedge funds, and angel investors while attempting to work throughout the entire capital structure to seek the highest possible valuation at the lowest blended cost of capital while maintaining the most control possible.

Author: Mike Myatt
Article Source: EzineArticles.com
Provided by: Guest blogger

Bootstrapping is when you the Entrepreneur decide to go it alone using on the ground resources from personal savings to second mortgages. Equity Financing is when you the Entrepreneur decide to give up a percentage of the ownership of your company in exchange for needed capital.

Bootstrapping Early Sources:

1. Founders’ Capital

2. Savings

3. Credit Cards

4. Second Mortgage

5. Venture Leasing

6. Sales Revenue

Bootstrapping Later Sources

1. Lines of Credit

2. SBA Loans

3. Asset Backed Lending / Accounts Receivable Factoring, etc

4. Corporate Strategic Partnerships

5. Banks that Lend To Start-Ups

6. Government Grants (e.g SBIR, DARPA)

7. Company Earnings

Under Equity Financing, depending on the source one may have to give up 25%-75% ownership of the company. This is usually depending on the nature of the deal and what can be negotiated. Under Equity Financing you must also be aware that there are Early and Later Stage Sources.

Equity Financing Early Sources

1. All Bootstrapping Early Sources

2. Friends & Family

3. Angels

4. Angel Groups

5. Early Stage Venture Capital Firms

Equity Financing Later Sources

1. All Bootstrapping Sources

2. Venture Capital Firms

3. Corporate Venture Funds

4. Private Equity Firms

5. Private Placement Firms

6. Mezzanine Financing Firms

7. Investment Banks

8. Public Markets

In order to make a sound financial decision make sure your Business Plan is strong and paints an accurate picture of your business idea or project. Proformas and Valuation of the business must be honest and realistic. Angel investors and Venture Capitalist are only going to back ideas and companies that are going to surrender the safest and strongest (ROI) return on their investment.

Author: Doyle Roberts
Article Source: EzineArticles.com
Provided by: WordPress plugin Guest Blogger

During the last thirty years, merchant bankers have drafted and polished to perfection the requirements for investing successfully in high-growth private companies. Lo and behold, those principles happen to be the same as the elements of tribal marketing. How come?

Like in any business riddle, the answer is already contained in the question: both venture capital firms and tribal entrepreneurs aim at a rapid multiplication of invested capital. What are the characteristics that identify the potential of a business to grow at a compound rate of 15% per year and beyond?

1.- PEOPLE IN PAIN. It is not difficult to sell dental services to someone suffering from a horrible toothache. You are bound to do well if your new product or service addresses an urgent unsatisfied need, but there are not that many of those. Failing real pain, a strong emotional desire will do. Satisfying entrenched passions is the card played by tribal marketing, which is equivalent to the old venture capital dictum of seeking customers with maximum pain.

2.- PEOPLE IN TARGET. You won’t hit targets that you can’t see or reach in a relatively efficient way. Before investing in a private venture, merchant bankers check if the customers of that business are, to a good extent, a homogeneous group. Is your product or service aimed at a group that you can easily reach, such as trial lawyers, paediatricians, or school teachers? Starting your own parade is an expensive marketing method. The most successful tribal marketers find an ongoing demonstration, approach protesters, and sell them T-shirts favouring their cause.

3.- PEOPLE IN TOUCH. The best markets are those where customers sell themselves. If your product or service delights ophthalmologists, they will tell their colleagues during their next conference. If you use such strategy, customers will find you on the web without your having to spend much on advertising. Investment bankers always search for this factor of “spontaneous marketing” when considering funding a new product or service. Tribal marketers often go beyond this level and they actually provide themselves an internet forum for customers to talk to each other.

4.- PEOPLE IN GROWTH. “How are you going to grow your company year after year?” is one of the toughest questions that a businessman must face when trying to obtain funding from a merchant bank. If your venture is destined to become a one-trick pony, your growth prospects will be too limited to justify a substantial commitment from professional investors. Tribal marketers use the clever approach of searching for items that can please their existing customers, instead of developing random new products which would require massive marketing efforts.

In essence, the answer is in the method. It is a matter of throwing away what doesn’t work and focusing on the little cream that floats on skim milk.

* The highest barrier to success in venture capital investment is caring too much for a product, to the point of becoming blind to the market.

* The most difficult aspect of tribal marketing is forgetting about what you want and making the effort to understand other people.

Mental flexibility is as profitable as it is demanding. Alternatives might look sweet and comfortable in the short-term, but ultimately, death ensues through marketing asphyxia.

Author: John Vespasian
Article Source: EzineArticles.com
Provided by: Cellphone news

Not banks.

Not family.

And definitely not loans from other non-banking organizations.

However, I recently heard something that made me think twice about exactly what kind of investor financing is best.

You see, while it’s true investor financing means you don’t have to pay any interest (after all, they are investing money, not loaning it), not all investors are made of the same stuff.

In this case, I learned about a dirty little trick many of the more “unscrupulous” venture capital firms will play on people. And that is to sort of “string you along” when you ask for money.

In other words, they will keep saying you will get the money you need next month or next week or whenever.

But in reality, they have no intention of giving you anything until the last possible minute.

Why?

Because, as any con man knows, when it comes to giving someone money, the longer they wait to give it to you…the more desperate you’ll be.

And the more desperate you are, the more they can ask from you in return.

In the case of venture capital firms, it will usually be getting more stock (and thus, control of your company) for their money.

Its a terrible thing for them to do. But many venture capital companies do it and so, you should be careful if you use one.

But really, this shouldn’t be a problem for 99% of people who buy a business.

Because if you are buying a smaller business, venture capitalists generally won’t bother with you anyway (that’s where “angel investors” come in to play).

And if you are buying a larger business (worth, say, $5, $10, $15 million or more) there are plenty of private investors — with more money than they can spend — who will give you whatever financing you need if what you are doing makes sense to them.

Anyway, keep this article in mind when thinking about how to finance a business you want to buy, especially if you don’t want to use a bank or other creditor.

Author: Michael Senoff
Article Source: EzineArticles.com
Provided by: Excise Tax

If you are considering getting venture capital for your startup company then perhaps you should read this book. After all would you like to sit down for a cup of coffee with a venture capitalist who has been in the industry for years before you go in pitch your business plan? In the book they describe how venture capitalists will work with many companies at one time expecting that one or two may make it to a huge payout. The rest they expect to either break even or lose money and they will eventually dump.

The world of venture capitalists is about return on investment in a very short time period and they are not looking for just making a profit they are looking to make 10 times or more the money they invested. There are many venture capital firms and often they bet on the jockey and not just the horse. A business idea or concept may be very good, but if the entrepreneur is unworkable the venture capitalists will have to pass. Please consider all this in 2006.

Author: Lance Winslow
Article Source: EzineArticles.com
Provided by: WordPress plugin expert

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 within 100 miles of their office(s). By investing close to home, the firms are able to more actively get involved with and add value to their portfolio companies.

Sector preference: many venture capital firms focus on specific sectors such as healthcare, information technology (IT), wireless technologies, etc. In most cases, even 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 different stages of ventures. For instance, some VCs prefer early stage ventures where the risk is great, but so are the potential returns. Conversely, some 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 make 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 work experience in your industry is very helpful. This relevant experience allows them to more fully understand your venture’s value proposition and gives them confidence that they can add value, thus encouraging them to invest.

Portfolio: Just 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 company management, since they are industry experts, often advises VCs as to whether the company in question is worthwhile. In addition, if your venture has potential synergies with a portfolio company, this significantly enhances the VCs interest in your firm.

Assets: Most companies seeking venture capital for the first time will require subsequent 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 will save the company significant time and effort in maintaining an adequate cash balance.

Finding the right venture capital firm is absolutely 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.

Author: Dave Lavinsky
Article Source: EzineArticles.com