5 Risks and Risk Management Strategies

Growth Production Selling Finance Team

    

 

 

Financial risk

 

Challenges

!!!  Insufficient funds or access to top-up finance

!!!  Need to address basic capital and cash-flow issues

!!!  Wrong mix of funds (e.g. gearing is too high due to high debt to equity ratio) 

Solutions

>> Good understanding of the venture financing process

>> Well prepared key documents for venture capital investors

>> Proper selection of the types of financing required for different types of activities

>> Identification of possible sources of seed capital: bootstrapping, business angels, venture capital funds, development funds

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>> Good understanding of the investment opportunity selection criteria of different types of investors

Actions

Understand investment criteria of venture capitalists and meet them; follow the step-by-step guide to venture financing

Study the start-up capital formation process, venture capital basics, and the guidelines for getting funding in today's market

Make financial assessment

Explore alternatives to VC financing and try to personally finance and bootstrap your firm as long as possible, until the need for external growth finance becomes evident and unavoidable.

 

  

Select type of finance you require

Search for angel investors and other sources of seed capital and study their investment evaluation criteria and procedures

Prepare a milestone chart and cash flow forecast

Build up a management team

Understand how investors read a business plan and their start-up business valuation principles

Study typical terms of stock issued to venture capitalists, and how to structure the deal; develop option for investors for realizing their financial returns and possible exit strategies

 

 

Prepare a start-up business plan

Prepare an impactful investor pitch  containing all  6W components; include a great story in your venture presentation and know how to make a presentation  to prospective investors

Negotiate the agreement with investors; take a professional help to structure the deal

Make the best of the venture capital obtained