Business Article - Taking investment to grow your business
While it can be a difficult and time-consuming process to get investment for your business, it ultimately results in a strong payoff. A good venture capital firm is an invaluable partner in growing your company. Not only will a good venture capital firm be able to provide you with money that can allow you to make your company large quickly, your new business partner should also be able to help you locate expertise and acquire the best advice and consultation for your industry. When is the best time to start looking for venture capital? Generally, once your company has had a strong initial success with an initial product or in one region a venture capital firm will be willing to form a partnership to help your company expand, either by funding the development of new products, opening up new channels of distribution or otherwise making a specific enhancement to the existing success of the business.
Many people starting to look for investment are only interested at first in acquiring more money for their company and fail to consider the wide variety of reasons why one venture capital provider may be better than another. The venture capital provider that you strike a deal with should be one which has a proven track record of experience in your industry. Such a company will not only be able to help you with funding, they can provide assistance in determining whether your overall approach or specific aspects of your business are well suited to the current market. Venture capital providers with industry experience also have extensive industry connections which can lead to opportunities you would otherwise be less likely to find. Make sure that the venture capital firm you end up partnering with is able to interact with you as a true partner and provide a number of benefits beyond the simple influx of funds. The best way to find the right company to partner with is to ask around within your own industry, at trade shows, etc. and find out who has the best reputation. Maximize your chances of success by partnering with the best people at every stage in your company's growth and development.
After determining one or a number of venture capital companies with good reputations in your field, you will want to put together a plan for presenting your own company and your case for funding. You need to be able to express the value of your business and what you will be able to achieve in a manner which is clear and concise. Remember that venture capital investors are constantly being exposed to new business plans; the plan that you present them with should give them a strong basic impression which will stand out among hundreds of others. Your goal with the initial presentation is to get the investors interested in taking a closer look. Practice summarizing and delivering your pitch in person before you make the presentation to the important venture capital firms. Spend time on putting together a well composed executive summary - this is the first paper representation of your company that most venture capital investors will see and it comprises an overview of the business, its plan for growth, its management and history. If your executive summary makes a good impression the investors will want to see your business plan, which goes into all of the above areas in significantly greater detail. Seek advice from consultants that specialize in writing business plans for your industry and make sure that everything a potential investor wants to see is included. Every impression that you make should be carefully considered. When you get the change to make a personal presentation, convey your own enthusiasm for your company and demonstrate the motivation that you have to grow the business.
During the entire process, be sure to accentuate the ways in which your business is unique among all others in its industry. Any patents or special legally protected processes that you own which give you an advantage represent a direct value to the investor. Talk about the ways in which your products and techniques are faster, less expensive, or otherwise better than the competition. It is also important that you are clear and upfront with all the details of the company history. If there have been any problems in the past which have been overcome, don't try to hide them - instead show how you were able to recognize your mistake and adapt to continue growing your business. Everyone makes mistakes at some point; the important thing is that you demonstrate that you are able to learn from them and move on. You should have a good idea of what you are going to do with the money from the venture capital firm when you receive it; be able to give the investors a breakdown of where the money will go - how much will go into development of new products, how much will go towards hiring specific new people, how much will go into advertising, how much will go into new facilities, and so on. You should also have a realistic sense of the profits which you stand to realize from the growth of the company, along with goal points on various scales such as a couple months out, one year out, two years out and so forth. Often investment capital will be provided in parts contingent with meeting each of several goals in a business plan; this is a good way to keep the development of your company on track and make sure that the money you receive goes to good use. If you don't achieve the desired benefits with the money you receive, a plan of this type will force you to take a step back and look at the bigger picture, determining why things happened the way that they did and responding to any new market realities. If there is any possibility that you will need additional funding at some point in the next couple years, be sure to communicate this to your investors during the beginning phases, so that they will be able to save in case it is required. It's always easier to deal closely with one investment capital company, rather than find yourself having to go through the search for venture capital partners again several years down the road when unexpected expenses come up.
Most venture capital companies want to exit their investment after a period of three to seven years. Within this time you should be able to achieve whatever profit goals you have outlined in your business plan. The venture capital firm will then try to sell their investment to another firm or investor, or they may expect to make a profit by taking your company public via an initial public offering, then selling their portion of the company. If you can show the investors a good way for them to make money on a sale within this timeframe, they will be far more likely to consider your proposal. Venture capital agreements often involve the venture capital firm taking a certain amount of stock in the company, so if you have any chance of going public you should be sure to emphasize that and work towards that goal. Not only is this a strong profit making opportunity for the venture capitalists, it is a way for you to make large amounts of money as the head of the company. If you can time the release of one of your new products with the initial public offering or make the IPO announcement on the heels of a significant milestone you will be more likely to have a highly valued stock and you can receive a massive influx of cash which helps you bring your company to a whole new level beyond the initial venture capital funding period.
To recap, taking investment to grow your business involves identifying the most unique and valuable aspects of your business (such as the products or techniques which give you a specific advantage in your industry), putting together a consistent and clear business plan which reflects how you can use investment capital to help your business meet specific milestones, finding a venture capital provider that understands your industry and is able to help you not only with funding but with connections and advice that assists you in navigating the next few years, demonstrating your worth to the venture capital provider and finding a plan via which both you and the investors can make a profit over the next couple years with a well defined exit strategy. Remember to keep the big picture in mind while taking care of the details and communicate closely with your investment partner. If your business has reached the point where it has an initial proven success, congratulations - you are likely ready to start thinking about looking for outside investment and, if successful, you could be on the way to making huge profits with a significantly larger company or even achieving an IPO and selling stock on the public market.