Funding Your Business

If you’re having trouble moving your business plan from being a great idea on paper to becoming an active successful business, you may want to consider private
equity funding sources. According to a 2005 Pricewaterhouse Coopers survey, small American companies are raising their revenue forecasts and are looking into non-traditional financing. Venture capital is a subset of private equity and refers to investments made for the launch, early development or expansion of a business. Generally, venture capitalists are looking for returns of 25% and above, they will help companies grow but they eventually seek to exit the investment in three to seven years. They are financiers first and entrepreneurs second.

The Center for Venture Research tracks investment data and patterns regionally and nationally. According to the Center’s estimates, there is as much as $40 billion in venture capital reserves nationwide. During 1999-2000, venture capitalists were involved in deals with one of four companies they came across. As of first quarter 2005, the ratio was about one out of ten. The good news is that early stage investing is alive and well but most companies see more plans than they can ever look at. Since capital is invested by an outside group, individual or business who is not directly involved with the operation of the business, the added risk of a large scale investment increases. On the other hand, venture capital and angel, or early stage investments, are crucial in sustaining economic growth.

An angel investor differs somewhat from a venture capitalist in that the angel is interested in a personal opportunity in the project itself, and will likely have business experience relevant to your company. They will often mentor a company and provide the needed expertise to help develop that company. They are entrepreneurs first and financiers second. Companies usually seek anywhere from $150000 to $3 million from angels, which may be less than they would possibly receive from a venture capitalist, but the business owner would retain more equity. When deciding whether an investment should be made, some of the questions an angel will ask are:

Do we share the same values?

Does the management team have accomplishments and a reputation in the industry?

Does the team have a history of running successful businesses and returning value to investors?

When preparing yourself for submission to a venture capitalist, your executive summary should be simple and easy to understand. You must persuade this person to invest in your company just as you would persuade your customer to purchase your product. The venture capitalist will look to the people behind your company regarding the reputations of your chairperson and board of directors.

Although venture capitalists have a desired return in mind when considering a project, they don’t necessarily have to meet it, and in most cases, they don’t. Generally, they want to know that the desired return is a possibility.

There are other sources available when considering equity funding. According to CAPS Interactive, a financial boutique, 90% of venture funding is accomplished through resources other than venture capital. Locating these resources on your own, however, can be time consuming and getting them to agree to review your business plan or executive summary can be tough without an introduction. To assist you in this process, there are intermediaries available to hurdle various obstacles. If you would like to learn more about how to navigate through the selection process and qualify the right funding source, we can help you bridge the gap. To learn more, contact Quantum Funding Solutions, 623 566 1700 or via email at quantum1funding@aol.com.