The first step in seeking venture capital is to determine the worth of your company. A lot of financial experts will point you in the direction of a banker or lawyer, or a certified public accountant. The more experienced they are, the more likely they will know of small businesses that are likely to be successful. Once you have determined the value of your company, you can look at the future potential. In addition, the amount of money you seek to raise will be directly related to the stage and goals of your business.
Because the capital markets structure is not ideal for new business ideas, venture capital serves a critical niche. Many individuals with a great idea have no other option than to turn to a bank for financing. Moreover, banks are prohibited from charging higher rates of interest, which makes them hesitant to fund start-ups. Furthermore, bankers usually require hard assets before approving new investments, which is not always possible in today’s economy.
In 1978, the venture capital industry saw its first major fundraising year, raising $750 million. In those days, the Employee Retirement Income Security Act (ERISA) prevented many of the risky investments that venture capitalists were making. However, this law was eased in the early 1980s, thanks to the “prudent man rule.” This allowed VCs to access a large source of capital, including corporate pension funds. The NASDAQ Composite index peaked at 5,048 in March 2000, and many entrepreneurs and companies were funded through a VC.
However, the structure of capital markets has created a need for venture capital. In most cases, entrepreneurs and investors with new ideas have no other institution to turn to. For example, banks are limited in the amount of interest they can charge on loans. Therefore, venture capitalists are able to charge a higher interest rate, because the risk of failure is higher. Generally, bankers are only willing to fund new businesses if they have hard assets. In today’s economy, many start-ups don’t have these assets, so they have no other choice but to look for other sources of funding.
In the United States, venture capital has allowed entrepreneurs to turn their research into product. It has facilitated the development of many high-tech companies, and it has allowed the country to support entrepreneurial talent. The United States has also become a global leader in transforming basic research into products. A recent NASDAQ Composite index reached 5,048 in March 2000, making this type of venture capital more important than ever. This type of funding is vital in today’s economy, so don’t miss out on this opportunity.
The structure of the capital market plays a huge role in the success of venture capital. A business that is just beginning will typically not be able to obtain financing from a traditional bank. It will need to raise a significant amount of money. To be successful, a startup must have a high-quality management team and an outstanding product. It is critical to have a good track record and a proven customer base. When it comes to raising capital, a start-up must be ready for several stages of growth.
