If you're seeking venture capital (VC) to help launch or accelerate a business, first understand a little about who venture capitalists are – and are not. There are many widespread misconceptions. Venture capital is money put up by professional venture capital firms that invest alongside management in young, rapidly growing companies that have the potential to develop into major economic contributors, says the National Venture Capital Association (NVCA).
Many people think of venture capital investors as wealthy financiers looking to fund small business startups, but that's more a description of angel investors. In reality, professionally managed venture capital firms are usually private partnerships or closely-held corporations with an available pool of money that comes from pension and endowment funds, foundations, corporations, wealthy individuals, foreign investors and the venture capitalists themselves. Venture capital investors are highly demanding – typically seeking a big payback (like 10 fold or more) within five to seven years. They may sift hundreds of opportunities to find one they like. Here are some things to know as you seek small business finance via the venture capital route:
" blog is a great way to keep up with the latest financing solutions, trends and strategies for small and medium business, and startups.
Find firms that look like a good fit with your opportunity
The National Venture Capital Association is a membership group of venture capital firms and venture capital funds, and has a venture capital directory.
I recommend: The
NVCA membership list is a free online venture capital directory, complete with links to many individual venture capital firm websites where you can discover what types of investments they are interested in, their submission guidelines and perhaps examples of companies they have backed. There's also a detailed
overview of how venture capital funding works.
Discover a typical venture capital firm's investment criteria and tips for entrepreneurs
Allegis Capital is just one among hundreds of venture capital firms in the U.S., but its website offers a helpful window into how a VC firm is set up and operates.
I recommend: Check out the firm's
investment criteria for entrepreneurs seeking venture capital funding, tips for startup entrepreneurs and brief descriptions of companies it has backed.
Tap a free online venture capital directory of over 1,400 firms
vFinance is an outstanding online service that has one of the most comprehensive venture capital directories anywhere. There's help finding a venture capital firm, venture capital broker, China venture capital, venture capital news and much more.
I recommend: vFinance says it constantly checks its list for accuracy. Access to the
complete list of VC firms is free and easy.You can also download the complete list for $199, with more detailed info on each firm. Or use their handy
VC search tool. You can also
post your business plan to showcase an opportunity to potential investors.
For small sum, tech startup backing, check out Y Combinator
This unique seed funding group splits its time between Cambridge MA (summers) and Silicon Valley (winters).
I recommend: Get to the
Y Combinator site and read up. There's nothing fancy, but if you have a startup idea in the software or web services area and need between $5,000 and about $20,000, step up and submit your idea. These savvy startup funding folks are more interested in good ideas than slick business plans.
Try Small Business Investment Company (SBIC) financing
SBICs are licensed by the U.S. Small Business Administration but are privately owned and funded investment firms that provide venture capital for small business.
I recommend: Some SBICs specialize in certain industries, while others seek companies with innovative ideas and products, and some offer social venture capital. SBICs use their own capital, plus funds borrowed at favorable rates with a government guarantee. See the
SBIC Hotlist published by the SBA. The National Association of Small Business Investment Companies (
NASBIC) can also help you
locate one.
Peek into venture capital funding resources at other online portals
Business financing "portal" sites offer a variety of ways to fund a business, including venture capital.
I recommend: At
BusinessFinance you'll find information on venture capital sources in the
Equity Investments section.
NVST's Capital Motion program offers access to angel investors, venture firms, corporate venture funds and other private equity investors.
Raise your own equity offering online
Active Capital is the only low-cost Internet-based option to register securities for sale -- up to $5 million/year.
I recommend: Active Capital is a non-profit program and Web site for entrepreneurs seeking private investment and private investors seeking deals in a secure and protected environment.