Venture capitalist is the person or group of person that provides money to startup or existing company. Most venture capital comes from a group of wealthy investors, investment banks and other financial institutions that pool such investments or partnerships. Venture capital is also known as Risk Capital however they soon change it to Venture capital because investors dont like the idea of combining Risk and Capital. Also, they are more focused on the potential rate of return your company can provide.
In order to attract VCs, you have to consider some major key points. First thing that you need to consider is your management team. Your team should consist of experienced people especially on the field on Marketing and operations. It is very important that your marketing and operational executives are experience in handling the most difficult situation especially on start up company. VCs also like to deal with people who already have credibility in the industry. It is not enough that your management team has the right attitude towards the company they should also have the ability to foresee and solve the incoming risks.
Second, you should have competitive advantage meaning that you should a unique style that other company doesnt have. VCs look at the competitive advantage a startup has before they determine the startups growth potential. A company has a competitive advantage if competitors cannot easily imitate their core competences. Startup should study their competitive advantage before approaching potential investors.
Third is your potential to the market, it should clearly define the potential earning that your company will make. Investors closely look at the market potential for a startup idea before they decide to fund the idea. Startup should consider three main things, your market needs, market size and market penetrability. Market needs tells the problem that needs to be resolve. Market size is the quantity of the sales opportunity that company will be facing. Market penetrability is simply tells investors how easy to make sales and generates revenue.
Last will be you Exit strategy, yes this is important to have an exit strategy. Investor prefers either IPO or acquisition as a means for exit strategy. IPO or Initial public offering is describes as the process where a private entity offers its shares to the public for the first time while acquisition is bigger company will take control of the company depending on the shares. Most VCs prefers going public however not all companies have the potential to go for IPOs.
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Venture Capitals doesnt not only provide capital for startup they also help companies to succeed. Venture capitalists sometimes find themselves partners in new business they are funding. Most take an active role the businesses. A few, however, simply provide the funds and step aside, preferring to let the experts handle the day to day details of running their business.
