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Venture capital firms invest in (usually) technology intensive firms with a breakthrough idea that has the potential to return three to five times their investment in about five years. Venture capitalists will invest relatively large sums of money, in the region of a few million dollars, for a stake and a very definite say in the running of the target company. They will bring along their money as well as their expertise, and in return will expect the business to spurt, after which they’ll go out as quickly as they came! Since their expectations are so high, venture capitalists will only back a team that displays strong capabilities and vision. That’s the first lesson on how to raise venture capital – you have to knock their socks off before you can get them to part with their money.One thing to bear in mind is that the investors’ interest lies in the growth potential of your business, and the returns it can hope to generate. Remember, they don’t care about earning an interest on their investment; they’re after much bigger stuff, which is the valuation of your business a few years down the line. In other words, they will look for opportunities to sell their stake or the business altogether, at an enormous premium. So, be prepared to tell them how they can get out as well!
Tags: Capital, raise, successfully, venture
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