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Daniel Kehrer

Guide to Finding Venture Capital

Online matchmaking services can help you find venture capital funding


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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:
  1. Venture capital investors finance new and rapidly-growing companies
  2. Some venture capital companies will consider startups; others want only young but established businesses
  3. Venture capital investors take an equity ownership stake in the business
  4. Venture capital investors often seek active management participation and may help develop products and services
  5. Venture capital investors take high risks with the expectation of high rewards
Business.com's "What Works for Business" blog is a great way to keep up with the latest financing solutions, trends and strategies for small and medium business, and startups.  

Action Steps
The best contacts and resources to help you get it done

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.

Tips & Tactics
Helpful advice for making the most of this Guide

  • Button down your business plan. A business plan is a "gotta have" piece in your financing puzzle. The plan should be realistic and cover all the bases. Avoid vague goals and pie-in-the-sky projections. It should document why the business needs financing, and how much is needed to reach a specified level of growth and profitability.
  • Put in your own money. If you want others to back you and your ideas, be prepared to ante up yourself. Investors want to know that you are risking something personally and that you will go the extra mile to make it a success.
  • Demonstrate a flair for management. The more charisma you can show on the finance dance floor, the better. And not just you, but your entire team as well. You must convey to potential funders that you are the best person on earth to manage and supervise the business you plan to create. Or if not you, that you have that person in tow.
  • Create budgets and financial statements that tell the tale. If your business is already operational, create some basic financials on how you are doing. Don't worry if you aren't looking completely gorgeous just now. Investors know that if everything were perfect, you wouldn't be looking for money.
  • Prepare - and then prepare some more. People with money to invest are in great demand. They've seen all kinds of plans, so they are likely to ask tough questions, be skeptical of your answers and have little patience for running off at the mouth. Your best step is to be totally comfortable with your plan.
  • Show how much you'll need and how you'll use it. It's critical to estimate how much money you think you will need overall. All good investors will want to know this, as well as what you plan to do with the money.

The official source of Finding Venture Capital is the Venture Capital page at Business.com


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Comprehensive business funding directory.

Provides online services and tools to entrepreneurs, investors and service providers.

on-line marketplace that connects the startup and small business community

Venture capital research firm that offers investors, service providers, and entrepreneurs the most comprehensive, accurate, and timely information on the venture capital industry.

This site enables you to post a synopsis of your business idea, research lists of lenders and investment banks, and get leads on accountants and lawyers.

Offers access to venture capital sources, research databases and educational resources.

Offers a library of forms, agreements and checklists to assist in getting funding for your business.


 Best Sites to Learn MoreBack to top 

Articles about finding venture capital for business owners.

Resource center containing articles regarding small business finance.

Raising start-up capital how-to guide.

Articles that cover the basics about venture capital, angel financing, and funding your business with loans or equity.

NVCA's mission is to foster greater understanding of the importance of venture capital to the U.S. economy, and support entrepreneurial activity and innovation.

Links to hundreds of VC sites, angel networks and articles on business planning.


  Best Blogs and Forums Back to top 

Chat about funding opportunities for your business in this friendly forum.

Forum about venture capital, entrepreneurship, and all other issues related to starting and growing a business.

Discussion boards that cover starting a business and financing it.

Involves global trends on venture capital.

Blog for entrepreneurs looking for VC funding.

Devoted to posts on how to present your company.

Blog exclusively geared toward small business venture capital.


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