search for capital has ended. Your
business plan, masterful
presentation skills, and
abilities served you well, and you've finally received the funding you
need to move your business forward. It was a long process, but now that it's
over all your problems are solved!
Not so fast!
Obtaining venture funding
is really only the beginning. Along with your funding, your level of
accountability just shot up dramatically.
If you received your capital from investors,
someone else now owns a part of your business. And they will want to be
reassured that they're getting their money's worth.
The degree of hands-on involvement may vary, but
most funding sources will expect to invest a combination of equity and expertise
in the form of
strategic management or
board level direction.
venture capital was instrumental in the success of
companies like, Apple Computer, Intel, Genentech, Federal Express, Gymboree, and
The Sports Authority can make your transition from sole proprietor to a national
The same management, financial savvy and growth
projections that made you a good investment risk, now must be perpetuated,
and reported on.
Management participation must increase, and may be upgraded as the company
Strict financial and budgetary controls must be implemented.
The whole success of your company now rests on
the ability of your sales and marketing team to reach your sales goals.
Venture capital professionals are essentially managers of risk. Besides
providing an important source of expertise for the emerging companies they
finance, venture capitalists know individuals in banks and brokerage firms,
attorneys, accountants, and others needed to help your company succeed.
Key Documentation To Be
Prepared by the Entrepreneur
A VC FIRM'S 'VALUE ADDED'
firms are not the only ones looking for value. Usually the
expect more than money in return for a share in their company. What
differentiates venture capitalists from the world of passive investors is their
long-term involvement with their investments.
As an active board participant, a VC investor
offers his/her unique set of experiences and skills. A good VC firm arranges for
the long-term financing of a company, and aids in developing the management
team, advisory board, new product ideas, strategic relationships, and key
customers and accounts.
Venture capital organizations are
generally privately held partnerships or corporations that invest alongside
management in young, rapidly growing or rapidly changing companies.
They invest large quantities of long-term risk capital, usually seeking
capital appreciation rather than cash repayment.
The company has a business plan that clearly defines the next year's goals.
The company uses a budget and constantly updates it against the
The company's sales force projects sales, and there is consistency with the
inventory and personnel loading in the budget.
The company has a program to quantitatively
A Venture Capital Firm expects to make significant
profits from their investment. They will not hesitate to suggest liquidation or
sale of your business if you do not meet the milestones agreed upon! Keep them
informed and involved.
Constantly looking for new opportunities to merge with or acquire new companies
to enhance shareholder value will keep you fresh in the marketplace. Always
looking for the
round of funding will, also.
Remember that it takes a minimum of six months to raise each round, so get