You’ve gotten your business going; now how do you get it
growing? Business financing is one of the most difficult aspects of
growing a business. An established and flourishing business certainly has
an advantage when seeking to procure funding for expansion. A venture
capital company or other venture capitalist may be willing to supply the
needed infusion of financing, but this benefit may come with a high
price tag, often on the order of 50 percent of profit.
For a company with a hot product, especially one with low overhead
such as one-shot software products that must hit the market
quickly, or for a business finding itself in a grow or die situation
(often resulting from intense competition), turning over a large share
of profits may be a suitable tradeoff for explosive growth. Venture
capital funding has launched many small businesses into the mainstream,
and may be able to help yours — especially if the venture capital
resource you choose can provide services such as mass marketing.
Venture capital financing should be investigated by any established
company seeking to grow rapidly or by new companies with a potentially
explosive product or service.
When seeking venture capital financing, don’t forget to solicit
friends and family members, who may be willing to fund your business
venture for a piece of the action and will most likely expect a much
smaller slice of the pie than will professional venture capitalists. A
family member or friend who is also an investor may be motivated to help
you with your business, since they have a vested interest in its success.
Be careful when entering into a venture capital arrangement. If you wish
to maintain firm control of your business and the direction you wish it to
take, you must make clear to investors that they are to play the role of
silent partners when it comes to management decisions. A professional
venture capitalist may demand certain rights, which may include a say in
business decisions and how funds are to be spent. Always consult with
a business lawyer before signing any venture capital agreement.
Authored by Kenneth L. Anderson.
Original article published 26 February 2005, updated 1 April
2006.
Follow links to the right to learn more about venture capital, venture capital financing and venture capital resources.
At the left margin, Related Links address topics of interest
pertaining to small business and commercial financing, such as small business grants and
loans and accounts receivable factoring, as well as other small business
resources available to entrepreneurs and business owners.
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