Startup venture capital 101

Startup Venture Capital 101

Startup capital is the capital that an entrepreneur needs to pay the necessary items needed when starting a business, like business space, equipment, supplies, and employees paychecks. Meanwhile, venture capital is the fund that a venture capital (VC) firm or an angel investor would provide to a starting or trouble-laden business.

Unlike loans, venture capital is invested in the business rather than being returned. With bank loans, for example, the money borrowed should be returned within a specific period of time along with interests and other fees. But with venture capital, the money is provided in exchange of equity in the business. The venture capital firm would take part in the business, they could have one of their own to be a member of the board of directors.

Aside from having a portion of the company, the VC would also have the right in knowing the operation of the business. Their opinions would matter especially when making decisions in the company. VCs rarely concern themselves with the daily operation of the business unless the life of the company or business is being threatened. Aside from this, the VCs opinion would also matter and they could prohibit the portfolio company to close down.

The difference between a venture capital firm and an angel investor is simple. An angel investor does not operate like a firm and more of a wealthy individual who invests in startup businesses. An angel investor usually does the transaction informally and privately. An VC firm could be a group of wealthy investors or an affiliate of a bank or an insurance company.

Another difference between an angel investor and a VC is the amount that they could give to the starting entrepreneur. VCs would normally provide funding not less than $250,000. Angel investors on the other hand could give a smaller amount than VCs but still in exchange of equity.

Not all venture capital firms invest on startup businesses. There are different types of capital which depends on the different stages of the business. For example, the seed capital would be mainly for research or planning stage. Startup capital would be for the procurement of initial needs. The mezzanine capital would be fore expansion and there are also later-stage capital or funding which would be for transitional stages in the company. So before you bring you business plan to a venture capital firm, make sure that they are indeed for startup businesses.

VCs do not just invest on the next business venture. Currently, because of economic crisis affecting us, venture capital firms would rarely invest in other business but rather concentrate on their existing portfolio companies and make sure that they are running well.

But even if we are not in an economic recession, VCs are still very selective with their investments. They would have to consider the nature of the field where your business will be a part of, geographic or location preferences, the product or the services marketability, strong management and competition. Aside from that VCs are known to accept those businesses that would enable them to profit big time within 3 to 10 years, other within 5 to 7 years.

Application for a startup capital would require the entrepreneur to submit a comprehensive and complete business plan. Some VCs would even require the list and credentials of the management team and financial projections. The entrepreneur just needs to clarify with the VCs about the additional requirements.

To exit out of a business, the VCs would sell their share of the company through an initial public offering or IPO to the company. The company or the business could buy the stocks within the next 7 years. They could also exit through a merger with another company, where the VCs would receive payment for their stocks. VCs could also exchange the equity for money and the management teams gets incentives from the equity.

We would need to understand capital venture firms and their startup capital investment. In this way, simple, starting and young entrepreneurs could start their business an know their options. If you have decided that VCs are the right place to go for your business venture, then go ahead and present your plan. It could be start of your success

 

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Startup venture sources of capital

Startup Venture: Sources Of Capital

During a startup venture, capital sources are a problem. If you are just a beginning entrepreneur or it is the first time you will be venturing into a business, then the most important question is how you start one if you have limited funds. The truth is, where you get the funds would define how you will be paying the fun and at the same time how to raise money to pay for it.

What is startup capital? Why do you need it? You would need the startup capital so that you would be able to promote your product or your services. You would need it to get your business financed. So even before you started running after possible financiers of your business, you would to make sure that you would have plans that would ensure that it will grow.

When we talk about getting a business financed, the first thing that comes into our mind would be going to the bank and applying for business loans. The problem with banks is that most of their business loans would require the loaner to have a business already. But there are also banks that would offer startup venture loans. They would just need somebody to guarantee it and a good business plan.

Another institution that could help with the loans would be private angel investors or venture capital firms. They would require, still, a sound business plan and financing plan. These venture capital firms would invest on your business but they would require the return for a certain period of time. The transaction may sound easy, but it is not. So if you are planning to get a venture capital firm to finance your business, then you should also get a lawyer used to this kind of transaction so they maybe able to assist you.

The problem we are facing now is that not all private angel investors are looking for new investments. With recession on our backs, they are more into protecting their current investments that getting another one. If you are facing these issues, then there are still ways on how to get that startup capital.

There are some companies that still offer personal loans which range from $10,000 to $100,000. Just make some research about these companies. But these companies just do not allow a person to loan from them easily. They would require that the person borrowing to have good credit and ability to pay the loan. They would investigate if the loaner would have these credentials, and they could be very stringent.

Friends and relatives are also big help in producing that startup capital. But, remember, that when borrowing from friends or family, even if they are family, you would still have to treat them like an investor. A loan is a loan. You would have to figure out how you will be paying and the length of the paying period. You just need to let them know that you will be needing assistance with your new business and show your sincerity and confidence in your ambition and certainly they would work with you.

In this period of economic strain, you will have problems getting your business plan backed. You just need to have a solid business plan and dedication to make it work. You do not need a sob story to get financed, companies are looking at how their investments would return and your should include that in your business plan.

If you cannot get the ideal source of funds, then you would have to start in the bottom and slowly climb to the top. In any business venture, getting startup capital is hard but once you get the success that you would want, its worth it.

 

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Startup venture capital essentials management skills

Startup Venture Capital Essentials: Management Skills

Some people would think that raising the startup capital for a business venture would be the difficult part. Contrary to that, keeping the momentum and maintaining your business running would be the most difficult part of all. Most businesses would fail, not only due to lack of funds, but poor management skills and cash flow.

There is no special skill needed when starting a business. You just need to have important skills and attitude that will help you deal with business difficulties and different situations.

• Discipline Staying focus is very important. Some entrepreneurs would quit after the first time they encounter a problem. It would need self-discipline to see to it that you would carry something that you have started until the end.


• Determination and Perseverance- this two traits go hand in hand. It would take determination for a person to be able to reach personal and business goals. It would take perseverance to continue even after a rejection or an initial failure.


• Time management- some entrepreneurs would fail miserably in their time management. But this is a very important skill that should be mastered. These would enable an entrepreneur to carry out and prioritize responsibilities.


• Knowledge- never enter a business you are clueless about. Of course, you could learn a lot while handling or managing the business. But basic knowledge about the product and services is important to keep the business afloat from competition.

Management skills go simultaneously with these traits. Using proper management skills will ensure that the business will survive. In businesses there is what we call the rare sense. This is an important business skill. Rare sense refers to the ability to think straight regardless of distractions and business issues that you have to deal with. Aside from that rare sense is also about making judgements based on facts.

It is perfectly normal for businesses to change the objective and style in achieving these goals from time to time. As the business progress, the management team should be able to identify the strengths and weaknesses of their strategies and style. Styles should be changed from time to time to adapt to new hurdles being confronted.

Startup stage usually last for about five to seven years. After this period, the business should already be profitable, operational and sustainable. By this time too, there should be some changes or addition made on the management team. Why?

During the startup stage, the kind of people you need are those who are capable of manufacturing the products or the services. The kind of people who would ensure that services would reach customers and maintain these contacts are what you need during the startup stage. But in the period that when the startup stage is already over, then what you would need would be the team that could ensure that profit would continue to grow and new customers introduced with the products and services.

New business stages would mean that there is a need for new management strategies and would need different management skills. An entrepreneur should continue learning as their business develops. This would ensure that the growth of the business continues.

Whether you are managing a large or small business venture, even if it is not in its startup capital stage, you would always need to have the proper management skills to keep your business developing and sustained.

 

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