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Venture Capitalists and Business Angels
Venture Capital
Venture capital is the 'big' option - you should only really be
looking at it if your home business concept is
technology-focused and would be able to make a bigger profit if
you had access to better hardware. Venture capitalists mainly
look for businesses that have the potential to grow really big
really quickly, but will also want everyone involved to be
experienced and confident.
Approaching a venture capitalist is a lot like approaching a
bank to ask for a loan, except you need to be a lot more
convincing. The person you meet will be a specialist in whatever
industry you're planning to enter, and they'll run a mile if you
don't seem one hundred percent sure of everything. Make sure you
research any venture capital company before you meet with them,
to see what they look for and who their existing clients are.
Remember that you're being scammed if they ever ask you to pay
anything, and be wary of anyone who insists that they won't sign
an NDA (privacy agreement) before they see your idea - they
might be planning to hand it to one of the companies they've
already invested in.
Be prepared for competition for venture capital funding to be
fierce. Really, the best way to get it is to build a good
version of your business on a small scale and then wait for them
to come to you. Also, you should be aware that accepting venture
capital funding will give the venture capitalists a significant
say in how your company is run. They will try to force you to
grow the company as large as possible, before cashing out
somehow, whether it's a sale or selling shares. They will,
effectively, take over your company and maybe help you get rich
- not too much fun if you're out to start your own business and
get 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 will invest in
smaller companies. For home businesses, angel investors are a
much better idea than venture capitalists.
Angels tend to behave more like a business partner. They'll
invest, say, half the start-up funds, and then take a personal
role in the day-to-day running of the business. This contrasts
with venture capital companies, which have a tendency to be
faceless and issue you written demands to be get more
profitable. A business angel brings with them experience and
knowledge as well as money, and they can be a great asset to
your business.
Still, you need to remember that they're in this to make a big
profit - when you build your business with the help of an angel
investor, you need to be able to show to them how they're going
to be able to get twice as much out of the business they put in,
and how soon. This doesn't necessarily mean that your business
needs to grow rapidly, but it does mean that whatever you plan
to spend their money on needs to be some kind of tool for making
back far more than the original investment over a relatively
short timeframe.
Staying Independent
Of course, the best way to stay completely independent is to
avoid accepting any outside investment. If you really need the
funding, though, there are still some ways to take it and stay
as independent as you can.
Make sure you keep at least 51% of your business. However many
investors you have, you need to keep hold of 51%, otherwise it's
not your business any more. Don't feel like you're entering some
kind of big system where you're lucky to be and you have to play
by these people's rules - if you have a genuinely good business
plan, then they're the ones who should be begging you for the
opportunity to invest for such a good return. If all else fails,
you might be able to persuade your friends and family to invest
just as much on far better terms.
About the author:
Original Source: Articles-Galore.com
Information supplied and written by Lee Asher of The Home Income Portal
Home of Serious Online Business Options.