Small Business Venture Capital

Venture Capital is money that is made available to get started with implementing an idea for a new technology or a business.

Those who offer venture capital are referred to as venture capitalists. A venture capitalist can be either a single individual or an organization. Single individual will invest in venture that they prize the most while organizations are ready to take on the risk of higher investment and investment spread across the globe. Really big venture capitalists have affiliate banks which provide the required cash for those requiring it for research and development activities.

Most venture capitalists offer money research and development activities on new innovations. When a venture capitalist offers venture capital for a small business they are most definitely going to ask for future earnings and profits of the company or a share in owning the company.

People interested in developing new technologies or innovations are ready to opt for venture capital because it provides them with the necessary funding they require. They may be in a spot where they cannot get loans from the bank because the nature of the project they are undertaking will not qualify for one. One big advantage in awarding venture capital for small businesses is that it helps to create jobs and helps small entrepreneur to take bold steps they would not have taken without such financial backing.

In developing countries such as Latin America and the Caribbean, venture capital is seen as a tool that helps the country and its people towards economic development. In a developed nation such as the United States venture capital is seen as a way for many innovative business ideas to come out. During the third quarter of the year 2006, venture capitalist were seen to invest about $6.6 billion in 797 deals, which really shows how much potential is out there and how much can be accessed through funding from venture capital despite the risk of such investment.

Sources for venture capital

Any business requires funding for a start-up. In the case of small business, there are many sources for venture capital. Here is a look into what these might be:

  • Small Business Bank Loans: Banks offers special loan programs for those who wish to start a small business. If you have to qualify for a bank loan you will need to show sound credit and profitability in your business venture. You should be able to articulate on how you will succeed and need a co-signer to get the bank loan through.
  • Small Business Administration: You can obtain money to start your small business through the Small Business Administration (SBA) agency . Their site offers comprehensive details on how to apply for small business finance. SBA is a federal government created agency that works independently and its aim is to ensure that small business entrepreneurs get their required finance and counseling they need to start their business.
  • Angel Investors & Venture Capital Firms: You can obtain venture capital from Angel Investors and Venture Capital Firms. They will require you to offer them a share in your business in return for the capital they are providing.
  • People who know you: Very often when you get the financing you need from those who know you, there is nothing better than this. Using this money you can start up the small business and set a target each year to pay off those who offered you financial assistance.

If you want to get venture capital successfully, you need to have a sound business plan.

Get the legal advice you need and consult experts on what might be seen as possible loopholes for a venture capitalist to withdraw financial assistance. This is important because a venture capitalist is keenly interested in having a stake in your business and wanting to sell it off that stake or share in the future for premium return. This being their interest you need to show definite profitability and future growth when you represent your need for finance to the venture capitalist.

You also need to be aware of the fact that they will ask you any type of question on your business and your skill, some of which may seem uncomfortable to you. However, once you get through this bit, you can get going with your business and benefit the venture capitalist by giving them a soundly business investment, that will yield rich return in the future.