Venture capital and 'angel' investing seem an attractive alternative to personal loans you ask people to invest their money in your business in exchange for a share of the profits. While it can cost you more in the long run, it means you won't be borrowing money as a loan that has to be paid back whether your business turns a profit or not.
Venture capital.
Venture capital is a 'big' option - you should only look at it if your home business concept is technology focused and can generate more profits if you have access to better hardware. Venture capitalists are primarily looking for businesses that have the potential to grow very large very quickly, but also want everyone involved to be experienced and confident.
Approaching a venture capitalist is a lot like approaching a bank for a loan, except you have to be a lot more convincing. The people you meet will be specialists in whatever industry you plan to enter, and they will go the extra mile if you don't seem one hundred percent sure of everything. Make sure you research any venture capital firm before meeting with them, to see what they are looking for and who their current clients are.
Remember that you're being conned if they ever ask you to pay for anything, and be wary of anyone insisting they won't sign an NDA (privacy agreement) before they've seen your idea – they may be planning to turn it over to someone. companies they have invested in.
Be prepared for fierce venture capital funding competition. Really, the best way to get them is to build a fine version of your business on a small scale and then wait for them to come to you. Additionally, you should be aware that receiving venture capital funding will give venture capitalists a significant say in how your company is run. They will try to force you to grow the company as big as possible, before cashing in somehow, whether it's a sale or a stock sale. They will, effectively, take over your company and possibly help you get rich – not much fun if you're leaving to start your own business and getting away from the typical corporate way of working.
Angel Investors.
Angel investors are like venture capitalists on a much smaller scale. They are 'real people' - individuals who would invest in small companies. For a home business, an angel investor is a much better idea than a venture capitalist.
Angels tend to behave more like business partners. They will invest, say, half of the initial fund, and then take a personal role in the day-to-day running of the business. This contrasts with venture capital firms, which tend to be faceless and issue written demands to become more profitable. Business angels bring with them experience and knowledge and money, and they can be huge assets to your business.
However, you have to remember that they are here to make big profits – when you build your business with the help of angel investors, you need to be able to show them how they can earn twice as much for the business they do, and how quickly. This doesn't mean that your business needs to grow quickly, but it does mean that whatever you plan to spend their money on should be some sort of tool to generate more than the initial investment in a relatively short time frame.
Stay Independent.
Of course, the best way to remain completely independent is to avoid accepting outside investment. However, if you do need funds, there are still ways to grab them and stay as independent as possible.
Make sure you keep at least 51% of your business. Whatever investors you have, you have to keep the 51%, otherwise it's none of your business anymore. Don't feel like you're entering some kind of grand system where you're lucky to be in and you have to play by these people's rules – if you have a really good business plan, then they're the ones who should be begging you for an investment opportunity for good returns. If all else fails, you may be able to persuade your friends and family to invest as much as you can on much better terms.
Post a Comment