Having a great business idea is one thing, and getting the funds to grow, scale and make the endeavour a success is another. Most entrepreneurs fund their business using their own savings, taking advantage of government grants, seeking help from family and friends, crowdfunding and potentially seeking venture capital.
Well, the best option depends on the type of business, growth plans and track record. Some remain self-funded forever, while others require capital injection from others. Getting the right funding, in the right amount and at the right time can make the difference between a company’s success and failure.
In this read, we are going to take a look at venture capital groups and whether they are ideal as a financing source for your business.
So, What’s Venture Capital?
Venture capital (VC) is a form of financing that’s provided by venture capital groups to startups with a potential for tremendous growth. High growth potential is a key term for venture capital investors. They look to invest a huge amount, experience fast growth and then sell the business and make money. For most of them a 10 million dollar company or even a 20 million dollar one is not worth their time. If you think your company can grow to become a billion dollar one, then it’s worth going to venture capital groups.
The Pros and Cons of Venture Capital Funding
The Pros
Business Sustainability and Growth
With a venture capital group, you will get the money you desperately need to grow and sustain your venture. Most business rent to run out of money or fail before they are able to realize their full potential. With the boom of online businesses in the past decade, venture capital groups have played a crucial role in helping companies stay in business and get the time required to fully develop their products or services. VC groups have saved a lot of companies.
Free Media Coverage
When you get financing from venture capital groups, you get a lot of free media coverage. This helps your company get recognized by numerous potential consumers, which could have otherwise taken you many years to achieve. Your business also gets to grow organically.
Experienced People To Help Grow Your Business
VC groups usually have experienced individuals that can really help your business reach its full potential.
The Cons
VC Groups Will Have a Seat on The Board of Directors
As substantial investors, they will probably want to be heavily involved in your decision-making process. They need to see a return on their investment and may make your dream to start feeling more like a job. There are cases of some entrepreneurs losing control entirely after getting VC funding.
You Might Lose the Joy of Having Your Own Business
The stress of dealing with VCs can sometimes be too much and can take the excitement of owning your own business. The monetary expectations and rapid growth can be a huge issue depending on your firm’s situation. One of the big hurdles is to grow in a specified period or fail. This prevents your business from growing organically.
Most VCs would rather see you fail fast than in four years from now.
