Early stage venture capital firms concentrate their investments on young businesses. Venture capital firms invest significant amounts of money with the expectation that there will be a large return within 5 to 7 years.
When choosing an early stage venture capital firm, it is important to realize that you are not visiting a bank for a loan. Venture capital firms are closer to partners and will have ideas about the management and development of your company.
Some important points when choosing a venture capital firm for early stage investment:
1. The firm should regularly invest with early stage capital. Seed investing requires different skills than first or second round funding.
2. Make sure you are comfortable with the level of management the VC firm will provide. Early stage venture firms are often very hands-on in their approach to management.
3. Know your business backward and forward. There is a tremendous amount of competition for VC funding, and the money often goes to those who are the most well prepared.
Approach early stage capital firms with a strong business planEarly-stage VC firms narrow the pool of candidates by reviewing business plans. Only after your business plan passes muster are you granted an interview.
Early-stage venture investing firms expect you to have assets in handVC firms invest a significant amount of money, but they do not expect to be the sole financial backer of a company. Raising capital before you approach a VC firm makes your company a more attractive choice.
Small Business Administration offers a variety of loans for businesses, whether they are just starting out or are looking to expand.
Use a matchmaking service to find the best early-stage VC firm for your companyThe right fit increases your chances of being chosen by a VC firm. Many VC firms specialize in particular industries. By approaching the right firm, you increase your chances of being selected.
- To you, the business concept or product may be the most important part of the company, but early-stage capital firms stress the importance of experienced management.
- Manage your cash flow wisely, both before and after you receive money from early-stage venture capital firms. If your early-stage funds are not handled wisely, it is very difficult to receive additional rounds of venture capital.
- Before you meet with an early-stage investment capital firm, practice your presentation and know your financial information by heart. You are dealing with experienced investors; do not try to pass off unrealistic profit expectations or downplay expenses.