Getting Money for Your Venture
I am often asked about funding for small companies. Many individual inventors and small companies believe that venture capital is the way to go. Venture capital is a great method for growth - for some companies. It is completely wrong for others.
How good is your management team? Most venture capitalists like to see an experienced team. I have heard several VCs state that they would take a mediocre idea with a team they know and trust well before they will take a great idea with a questionable team. If your management team does not have successful ventures behind it, venture capital probably is not for you.
How fast will your company grow? Most VCs are looking for rockship growth curves. Will your company grow 10X in the next three years? If not, VCs probably will not be interested. That does not mean that your idea is bad or that it is not worth pursuing? No. Some great companies got their on the long road. However, they probably did not get allot of VC interest.
How much do you need? If you need $500K or less you are probably not worth a VC's time. They manage large amounts of money and it takes less effort to invest $2M - $5M at a time. Some VCs just are not interested unless it is at least a $1M.
Is your business tech? While there are numerous VCs which deal outside of tech companies, most of the emphasis in Utah VCs seems to be in tech companies. You may have a great retail chain in mind, but a tech oriented VC probably will not be interested.
How much of your company do you want to give away? Many companies want investors to put money in, but do not want to give much equity away. If you are sure that the company is going to be in the black quickly and will not need substantial amounts of growth funding, VCs may be a very expensive option.
One place to look is for angel funding. Successful businessmen and women who have investment money may be willing to invest. While angels are typically more flexible than VCs - investing lower amounts and looking less skeptically at an unproven team - they will still want a chunck of the company to justify their risk.
Another option is debt financing. Your local bank may not finance your venture, but if you need $100K-$500K, one great option is InnoVentures Capital Partners. While debt financing places more risk on the entrepreneur, it also preserves more of his or her equity and lets the business owner have more say in how fast the business grows. If you haven't heard of InnoVentures before, it is because the company is in the process of rebranding. Known for years as UTFC Financing Solutions, the company decided to change its name to emphasize that it is not just for tech companies. In fact, a substantial part of its portfolio are service and manufacturing companies.
In addition to the ability to lend, InnoVentures has a very solid bank (pun intended) of start-up know how in Steve Grizell, Damon Kirchmeier and Scott Stenberg. While InnoVentures is not the only debt financing firm in town, they are definitely one to consider.
How good is your management team? Most venture capitalists like to see an experienced team. I have heard several VCs state that they would take a mediocre idea with a team they know and trust well before they will take a great idea with a questionable team. If your management team does not have successful ventures behind it, venture capital probably is not for you.
How fast will your company grow? Most VCs are looking for rockship growth curves. Will your company grow 10X in the next three years? If not, VCs probably will not be interested. That does not mean that your idea is bad or that it is not worth pursuing? No. Some great companies got their on the long road. However, they probably did not get allot of VC interest.
How much do you need? If you need $500K or less you are probably not worth a VC's time. They manage large amounts of money and it takes less effort to invest $2M - $5M at a time. Some VCs just are not interested unless it is at least a $1M.
Is your business tech? While there are numerous VCs which deal outside of tech companies, most of the emphasis in Utah VCs seems to be in tech companies. You may have a great retail chain in mind, but a tech oriented VC probably will not be interested.
How much of your company do you want to give away? Many companies want investors to put money in, but do not want to give much equity away. If you are sure that the company is going to be in the black quickly and will not need substantial amounts of growth funding, VCs may be a very expensive option.
One place to look is for angel funding. Successful businessmen and women who have investment money may be willing to invest. While angels are typically more flexible than VCs - investing lower amounts and looking less skeptically at an unproven team - they will still want a chunck of the company to justify their risk.
Another option is debt financing. Your local bank may not finance your venture, but if you need $100K-$500K, one great option is InnoVentures Capital Partners. While debt financing places more risk on the entrepreneur, it also preserves more of his or her equity and lets the business owner have more say in how fast the business grows. If you haven't heard of InnoVentures before, it is because the company is in the process of rebranding. Known for years as UTFC Financing Solutions, the company decided to change its name to emphasize that it is not just for tech companies. In fact, a substantial part of its portfolio are service and manufacturing companies.
In addition to the ability to lend, InnoVentures has a very solid bank (pun intended) of start-up know how in Steve Grizell, Damon Kirchmeier and Scott Stenberg. While InnoVentures is not the only debt financing firm in town, they are definitely one to consider.
Comments