If you consider yourself an entrepreneur and are looking to grow your small business, then one option you should know more about is venture capital funding. Partnering with a reputable firm, like Xfund, will give you access to money from investors so you can focus on growing your business. However, you should know more about venture capital before deciding if this is the best route for your company.
What Is It?
This is primarily money that is provided to your business through equity investments. This money comes from both angel investors and firms. Angel investors are people who have a lot of disposable income and can invest in small start-up businesses. They will typically invest in industries that they have worked in or are very familiar with. Firms will invest their funds into a wide range of start-ups and hope for returns from a few of them, knowing that some will fail.
Both angel investors and firms will examine your business plan and decide whether your company could be successful. They will likely ask for references and do market research themselves before investing. Both firms and angels understand that their investment will not provide immediate returns and will be patient while growing your company. Aside from giving you money, they may ask for some control over how you run your business. For instance, if you have a board of directors, be prepared to add your angel investor or a firm representative to it.
Do You Need Extra Funds?
The biggest advantage of venture capital is that you get access to the money you need to take your business to the next level. This is a good option if you have big growth plans. This is very useful in industries where businesses require a lot of money to grow. It also means that you will need to pay extra attention to how the money that your business earns is handled.
Do You Need Another Resource?
Another advantage of venture capital is that entrepreneurs get access to extra resources. For instance, if you choose to go with a firm, you can use their industry connections and business expertise. If you struggle in a certain area, like marketing or industry research, this could be a good way to boost your overall business strategy.
What if Your Goals Don’t Align?
Before taking any money from venture capital funds, be sure that you understand what the company or investor’s goals are. They will understand that this is a long-term investment, but most of them will be expecting large returns. Since they will want their funds, they will try to push you to take more drastic growth measures, such as merging with a more successful company.
This means that you need to speak up if you plan to continue maintaining control of your business as it grows. It also means that if you do not wish to use major growth strategies, like merging with another company, because you maintain a family-owned and operated business, you will likely not be of interest to angel investors or firms.
Will You Lose Your Independence?
Many business owners do not like tapping into venture capital funds because you are generally expected to give some of the decision-making responsibilities to the firm or angel investor that supports you. For instance, if a firm supports you, they will probably have ideas about how your business could be best run, and these may clash with your own. However, since you have taken their funds, you will be expected to adhere to their plans for your business. Therefore, if you do not want to lose your independence as a business owner, you will need to negotiate and get in writing exactly how much control the firm or angel investor will have over how your company is run before you take their money.
Is It Possible to Get Help From the Government?
When many small business owners are looking for funds to grow their business, they turn to the government. While the government does not offer venture capital, they do have a program that can connect businesses with firms and angel investors. This is known as the Program for Investment in Micro-Entrepreneurs and is run by the Small Business Administration. It is designed to help qualifying entrepreneurs get funds through venture capital so they can grow their businesses.
If you would like to grow your business, one tactic that can help you get the funds you need is venture capital. This is made up of angel investors and firms looking to get a long-term return for investing in a company. While they are a great way to get the money and expertise you need to grow your company, they can also require that you take extreme measures to expand your business and cede control to your investors.