Regional venture capital firms and funds provide backing for startups and small businesses that are seeking to expand. Regional VC firms have advantages over national and international firms.
Regional VC firms often concentrate their funding efforts on early stage funding or on businesses that do not fit into the traditional health care or technology focus of most VC firms.
Although competition for regional venture capital funds is less intense than national or international funds, it is important to know what to expect when approaching a regional VC firm. Some things to keep in mind when seeking funds include:
1. Regional venture capitalists expect the same level of preparation as larger VC firms.
2. Venture capitalist firms own a stake in your business, so investigate their success thoroughly before you enter into a contract.
3. Understand the contract before signing.
Gather pertinent information for regional VC firmsRegional venture capital firms expect the same information as larger firms. Less competition for money does not mean lower expectations. Give regional VC firms a well thought out business plan and a clearly outlined plan for where their funds will go.
Make sure the regional VC firms you approach are ones that will help your businessIt is easy to become so caught up in your desire to raise money that you overlook the business association that occurs with VC funds. A VC firm gives your company money in exchange for a share of the company's equity. The contract often includes a position on the board of directors and the ability to force the repayment of the VC funds and to liquidate the business if problems develop. It is important, particularly with a regional company who is often more hands-on, that you work with a firm you trust, on that has a track record of success and fair treatment.
Be ready to pay back regional venture capital fundsVenture capital funds are avenues of investment, not handouts. Regional venture capitalists are not giving away money because they are philanthropists; their goal is to have your company repay the VC in fewer than 10 years, along with a healthy profit. For the VC firm, it is business first, and regardless of how well you get along, if the company falters or loses money, or a high level employee leaves, the VC firm can call the loan, take over greater control of the company or vote members off the board of directors.
- Regional venture capital firms and funds are familiar with regional politics and business climate, and often know instinctively whether a business opportunity will work in the area or not.