Small Business Fundraising - Venture Capital Funding For Entrepreneurs

Investing and Funding in early-stage technologies companies by far always comes with a higher degree of risk. Indeed, the recent outbreak of the WCry virus has made the entire world of private funding and investing more uncertain, with strategies like fundraising, project management and other key project management poses more challenges than ever for today's young investors and entrepreneurs. It seems that when something catastrophic happens, it's usually only a matter of time until something like a natural disaster or company-wide outage takes place. This of course then renders the traditional, and oft used, investment strategies ineffective, and even puts the investor and company at unnecessary risks. Fortunately, there are other strategies and investment vehicles that have emerged in recent years that are able to successfully mitigate the risks of investing in early-stage technologies. Private equity financing is one such emerging strategy.

Venture capital funding and investing are basically angel groups that provide financing small amounts to business owners or individual entrepreneurs who are in need of initial investment to launch or grow their businesses. By doing so, these groups provide seed financing, which is not immediately available to the public, but serves as a kind of loan that business owners can use to obtain the resources they need to launch or expand their business. In exchange for this, business owners pledge a certain percentage of their future sales in return for the money, which they are then obligated to repay to the venture capitalist in the form of shares of ownership in the business. While venture capital funding and investing do come with a higher degree of risk for the business owners, they do come with more long-term benefits for investors.

One key benefit of venture capital funding and investing for the typical investor is the absence of strict requirements. Typically, a private investor will require only a personal guarantee from the entrepreneur, which is why these sources of private funding do not require the filing of any additional forms or paperwork with local, state or federal regulatory agencies. In most cases, these investors also do not require the submission of financial reports or annual financial statements, as well as periodic reports and evaluations of how the investments are performing. As a result, these entrepreneurs are able to seek the most favorable rates on these sources of private funding without having to deal with lengthy application requirements. However, there are also risks involved in these types of deals, especially with the high fees that some investors demand. These risks become even greater for smaller businesses because they are typically unable to obtain traditional lines of credit from traditional banks.

On the flip side, angel investors usually do have a number of restrictions and reporting requirements that they must follow. For example, most angel investors must ensure that they disclose the identity of their private funding sources, as well as provide the identity and contact information of the people who will be working with them on an ongoing basis. In addition, most angel investors will require business plan and financial documents that show how the funds generated will be used to develop and expand the company.

There are also risks inherent in the relationships between angel investors and venture capitalists. Because most of the relationships involve an interest in the personal business interests of the entrepreneurs, there is a possibility that the angel investors may decide to pull the plug on the venture if they are not seeing the benefits they expected. Unfortunately, this can have a devastating effect on the capital structure of the entrepreneur's business because the venture capitalists typically committed significant amounts of money to the business. While the entrepreneurs may be able to continue operating the business, they will need to seek additional capital to continue operations.

Funding and investing for early stage technology companies have become more difficult due to the current funding climate. Lenders are generally less willing to provide venture capital, small business loans or angel investment for companies that have not been generating profits or have little market value. Additionally, the federal programs initiated by the Stimulus Package and the PATIRA Act also have made it more difficult for some entrepreneurs to obtain financing. Due to the increased risk and competition, many angel investors and venture capitalists have been re-evaluating their relationships with early stage companies.

Private loans are one of the most common sources of capital for startups. However, they come with many constraints that make them difficult to secure, especially for startups with poor credit histories or ones with little revenue. Many private loans are obtained based on a borrower's credit score, which can make it difficult for people with bad credit to raise money. Also, there are often high fees associated with obtaining startup capital and most banks will require a significant upfront fee as a sign of trust that the business will use the funds properly. Private placements are also difficult to secure, as only a select few companies are regularly listed as placements.

The best source of venture capital funding is often angel networks. Angel networks provide funding for small business owners in return for equity in the business. This equity is used to purchase discounted debt from the entrepreneur in exchange for an exclusive license to use the business' intellectual property. The major benefit of this arrangement is that entrepreneurs are able to raise the capital cost of operations through multiple stages of an innovative business without the risk of having credit ruined. The risk is lower for investors, making them more willing to invest in the startup that is so critical to the success of the company.