What is Venture Financing?
Venture financing is an investment made by a third party in exchange for equity in a business or company. It generally comes with strings attached like receiving certain percentages of voting rights (known as “preferred stock”) and the expectation that they will see substantial returns on their investment at some point in time. Venture investors also hope that their investments help to catalyze innovation and create competition in markets where there are currently few options available. Venture financing is a lot like the traditional angel investor model that’s been around for almost a century. The difference is that with angel investing, you’re limited to individuals and families who have money to invest. With venture funding, any individual or company is allowed to invest in startups
Venture Financing and Venture Capitalists
Venture Capitalists are the professional variety of investor who are known for taking huge risks by investing in companies that are still in development. They tend to focus on seed stage startups, but will sometimes even invest after a company has “graduated” from the seed stage. The key to how these investors make their money is that they get special perks or shares of stock that are usually worth more than what they gave to the company at first. VCs come in all different shapes and sizes, but most of them work with angel investors as well as other VC’s to pool their resources together. The more investors that are involved in buying shares of a company, the less equity the company will have. Thus it is important that a startup considers who its VCs are and what their intentions are, because it could mean the difference between owning a huge chunk of the business later down the road or being lucky to get anything at all.
How Fintalent Consultants Can Help Your Business Attract Venture Financing
Fintalent’s Capital Raising Experts as well as its pool of freelance Market Evaluation Specialists and Product Strategy Consultants can help startups attract VC’s to finance their ventures. By helping to position businesses adequately for VC financing, our consultants can help businesses leverage on the ever growing presence of VC’s. Venture Capitalists are looking for companies that have monstrous growth potential, an idea that can really catch on, and of course something new. They are usually focused on large returns quickly, which means they are looking for companies that are already established or have at least one product that’s already completed. They also look for teams with experience in building companies before. If your product is already mature, they may not be interested because your company will probably already have funding from somewhere else. Lastly, they look for companies that are able to be built into huge companies that will eventually go public or get bought out by another company. Our experts can help you identify your areas of strength and position your business adequately.
The first advice from Fintalent consultants is to help you decide if venture capital is right for you. The venture capital model can be very appealing because often times the only required investment is your time, but beware of the risks associated with this type of financing. You should ask yourself if this money will actually help you build your business up rather than just line some investors’ pockets. If so, then venture financing might be worth considering, but whatever you do don’t forget about all the other types of funding out there too.
Next you’ll want to decide exactly what you need the money for. Venture capital is extremely complicated because it’s structured differently for each business based on its stage of development. If you’re at the seed stage , this means that you already have a prototype or an idea, but no product yet. In other words, you may have a “beta” product, but nothing that’s been completed yet. In this case venture capitalists will give you money to use to develop your idea even further and make it into a real product.
If you’re at the Series A stage , this means that you’ve either just created your product or are very close to creating it. At this point venture capitalists will give you money to help grow your company and pay for marketing to better promote your product.
Finally, if you’re at the Series B stage , you’ll need capital to help build out your existing business by hiring more employees, expanding into different markets, and developing new features for your product or service. Like what was mentioned earlier, venture capitalists take larger stakes in companies that are more mature because they assume that these companies will take off much faster since they already have something established before they even receive the startup money.
Other Ways Fintalent’s Freelance Consultants Can Help Raise Money for Your Venture
Raising money through the peer-to-peer method is very similar to how it’s done in the traditional funding model, but instead of going through banks or going on the stock exchange, you go directly to other people that are interested in investing alongside you.
Along with venture capital, angel investors also provide funding to companies in exchange for equity. Angel investors typically provide funding for start-up businesses that are just getting off the ground. Angel investing is often an individual investment in the business person’s personal investment portfolio whereas venture capital may be an investment made by a venture capital fund.
A recent trend is the rise of crowdfunding platforms. These platforms allow individuals to invest small amounts of money in order to lend support or make a return on their investment. For example, when a consumer pre-orders a product from a crowdfunding platform, they are investing in that company in exchange for rewards. In contrast to traditional venture financing, this type of financing does not come with the same level of risk because the individual investors do not receive equity in the company. However, investors may make a return on their investment if the business becomes wildly successful or is acquired by another company at a later time.
Helping firms raise money for their venture can be challenging and rewarding, but it does require a lot of initiative. Understanding that in return for the funding provided, there are generally some restrictions on an investment or an exit of an investment from one or both investors. The restrictions on investments may include the requirement that the company’s business plan be approved by a committee of investors, a management buy-out option be purchased, a pre-determined valuation given by the fund manager during the course of the product valuation process or an agreement that any proceeds from an exit have been obtained prior to being sold by either party. In order to secure investment, there will also be a requirement that the company seek financing elsewhere in the form of debt financing or private equity financing. All of these require a high level of expertise to accomplish and often makes the hiring of an expert an indispensable part of a successful venture. Fintalent provides a one-stop-shop for all of your finance expert needs with a wide pool of highly qualified and experienced consultants to handle every aspect of financial consultancy and venture financing.
