It's hard to compete successfully for investment capital without understanding venture capital key terms. Beyond a simple definition of venture capital as money invested in innovative start-up businesses or business research, your firm will need a working knowledge of other vocabulary related to raising capital. Your team can find several sources for the definitions and explanations but, as always, some will be better for your purposes than others.

Your team can find definitions for many venture capital key terms in a college economics textbook. However, better sources are business and investment publications, organizations and agencies that specialize in identifying venture capital sources and venture capital firms themselves. In fact, it is a good practice to compare the definitions or explanations so you identify "spin" or any "position" taken by a source. To build your vocabulary of venture capital key terms, do the following things:

1. Use a variety of sources of venture capital terms.

2. Refer to professional business glossaries for venture capital words.

3. Check definitions and explanations with venture capital sources.

Action Steps
The best contacts and resources to help you get it done

Start with general venture capital glossaries

To best understand venture capital key terms and information about venture capital companies, first study the definitions from general sources. This will give your team a foundation of understanding and point of comparison. Your team can find a range of general sources of venture capital terms online.

I recommend: Online glossaries such as those at FundingPost and The 500 Group provide good entry-level definitions of key venture capital terms.

Study business and economic definitions of venture capital words

It's a good idea to continue developing your venture capital funding vocabulary by checking business and financial sources. The definitions your team finds there will include more detail than from general sources and might include recommendations for finding venture capital. Start your comparison of explanations of common terms, especially the more difficult concepts, at this stage.

I recommend: Use the interactive glossary of terms at LBO Advisers to find definitions for various start up capital words. Your firm can use its detailed definitions to get a working knowledge of the terms. Verify your understanding of venture capital vocabulary with sources such as the well-respected BusinessFinance.com.

Add specific venture capital sources to your vocabulary arsenal

As the final refinement of your comprehension of terms about venture capital, check sources specifically related to finding venture capital. Although the definitions might be rather technical, you can combine your knowledge from other sources for a complete understanding.

I recommend: The glossary at Angels Corner focuses on venture capitalists, who are called "angels" in the venture capital world. Use the dictionary at Investor Glossary for definitions of venture capital key terms as well as other investment-related words. Note the gallery of words at the bottom of the page and the investment "Chart of the Day" link.

Tips & Tactics

Helpful advice for making the most of this Guide

• •  Securing venture capital funds is a business process. Consult a financial planner to make certain your business understands all of the important terms.

If you're seeking venture capital (VC) to help launch or accelerate a business, first understand a little about who venture capitalists are – and are not. There are many widespread misconceptions. Venture capital is money put up by professional venture capital firms that invest alongside management in young, rapidly growing companies that have the potential to develop into major economic contributors, says the National Venture Capital Association (NVCA).

Many people think of venture capital investors as wealthy financiers looking to fund small business startups, but that's more a description of angel investors. In reality, professionally managed venture capital firms are usually private partnerships or closely-held corporations with an available pool of money that comes from pension and endowment funds, foundations, corporations, wealthy individuals, foreign investors and the venture capitalists themselves. Venture capital investors are highly demanding – typically seeking a big payback (like 10 fold or more) within five to seven years. They may sift hundreds of opportunities to find one they like. Here are some things to know as you seek small business finance via the venture capital route:

1. Venture capital investors finance new and rapidly-growing companies
2. Some venture capital companies will consider startups; others want only young but established businesses
3. Venture capital investors take an equity ownership stake in the business
4. Venture capital investors often seek active management participation and may help develop products and services
5. Venture capital investors take high risks with the expectation of high rewards

Business.com's "What Works for Business" blog is a great way to keep up with the latest financing solutions, trends and strategies for small and medium business, and startups.

Action Steps
The best contacts and resources to help you get it done

Find firms that look like a good fit with your opportunity

The National Venture Capital Association is a membership group of venture capital firms and venture capital funds, and has a venture capital directory.

I recommend: The NVCA membership list is a free online venture capital directory, complete with links to many individual venture capital firm websites where you can discover what types of investments they are interested in, their submission guidelines and perhaps examples of companies they have backed. There's also a detailed overview of how venture capital funding works.

Discover a typical venture capital firm's investment criteria and tips for entrepreneurs

Allegis Capital is just one among hundreds of venture capital firms in the U.S., but its website offers a helpful window into how a VC firm is set up and operates.

I recommend: Check out the firm's investment criteria for entrepreneurs seeking venture capital funding, tips for startup entrepreneurs and brief descriptions of companies it has backed.

Tap a free online venture capital directory of over 1,400 firms

vFinance is an outstanding online service that has one of the most comprehensive venture capital directories anywhere. There's help finding a venture capital firm, venture capital broker, China venture capital, venture capital news and much more.

I recommend: vFinance says it constantly checks its list for accuracy. Access to the complete list of VC firms is free and easy.You can also download the complete list for $199, with more detailed info on each firm. Or use their handy VC search tool. You can also post your business plan to showcase an opportunity to potential investors.

For small sum, tech startup backing, check out Y Combinator

This unique seed funding group splits its time between Cambridge MA (summers) and Silicon Valley (winters).

I recommend: Get to the Y Combinator site and read up. There's nothing fancy, but if you have a startup idea in the software or web services area and need between $5,000 and about $20,000, step up and submit your idea. These savvy startup funding folks are more interested in good ideas than slick business plans.

Try Small Business Investment Company (SBIC) financing

SBICs are licensed by the U.S. Small Business Administration but are privately owned and funded investment firms that provide venture capital for small business.

I recommend: Some SBICs specialize in certain industries, while others seek companies with innovative ideas and products, and some offer social venture capital. SBICs use their own capital, plus funds borrowed at favorable rates with a government guarantee. See the SBIC Hotlist published by the SBA. The National Association of Small Business Investment Companies (NASBIC) can also help you locate one.

Peek into venture capital funding resources at other online portals

Business financing 'portal' sites offer a variety of ways to fund a business, including venture capital.

I recommend: At BusinessFinance you'll find information on venture capital sources in the Equity Investments section. NVST's Capital Motion program offers access to angel investors, venture firms, corporate venture funds and other private equity investors.

Raise your own equity offering online

Active Capital is the only low-cost Internet-based option to register securities for sale -- up to $5 million/year.

I recommend: Active Capital is a non-profit program and Web site for entrepreneurs seeking private investment and private investors seeking deals in a secure and protected environment.

Tips & Tactics

Helpful advice for making the most of this Guide

• •  Button down your business plan. A business plan is a 'gotta have' piece in your financing puzzle. The plan should be realistic and cover all the bases. Avoid vague goals and pie-in-the-sky projections. It should document why the business needs financing, and how much is needed to reach a specified level of growth and profitability.
• •  Put in your own money. If you want others to back you and your ideas, be prepared to ante up yourself. Investors want to know that you are risking something personally and that you will go the extra mile to make it a success.
• •  Demonstrate a flair for management. The more charisma you can show on the finance dance floor, the better. And not just you, but your entire team as well. You must convey to potential funders that you are the best person on earth to manage and supervise the business you plan to create. Or if not you, that you have that person in tow.
• •  Create budgets and financial statements that tell the tale. If your business is already operational, create some basic financials on how you are doing. Don't worry if you aren't looking completely gorgeous just now. Investors know that if everything were perfect, you wouldn't be looking for money.
• •  Prepare - and then prepare some more. People with money to invest are in great demand. They've seen all kinds of plans, so they are likely to ask tough questions, be skeptical of your answers and have little patience for running off at the mouth. Your best step is to be totally comfortable with your plan.
• •  Show how much you'll need and how you'll use it. It's critical to estimate how much money you think you will need overall. All good investors will want to know this, as well as what you plan to do with the money.

Keeping up with venture capital news and trends is easy. Because it is a key driver of the nation's economy, venture capital receives quite a bit of attention from business reporters and financial analysts. Typical news reports focus on the current state of the venture capital funding, venture capital firms and famous venture capitalists like Tom Perkins and Ann Winblad.

Raising capital investors is a very competitive proposition. Public news accounts can have strong influence on the business climate, especially negative news. For that reason, it is important for your business to study industry sources to understand the effects on the venture capital industry. As your firm collects sources of venture capital news, compare the approaches and find ones that resonate with your business approach. To best learn from capital venture news and trends, remember the following points:

1. There are organizations dedicated to venture capital information.

2. Many business sources report on venture capital trends.

3. The Internet offers local sources of venture capital news.

Action Steps
The best contacts and resources to help you get it done

Tap focused sources of venture capital news

Financial organizations, including those specifically focused on investment capital, banks and investment firms shine the spotlight on the venture capital industry and venture capital companies. Many economists use venture capital funding as one key measure America's business health. Tap these sources for a glimpse at the status of investment capital.

I recommend: The first source to investigate for venture capital news and trends is the National Venture Capital Association. In addition to current news, your team can find venture capital organizations, model legal documents and recommended companies to help your firm secure venture capital funding. Assign staff to monitor VFinance, a financial services company that specializes in finding venture capital for start ups and small businesses. It continually updates information on trends as well as funding opportunities.

Use business news groups as sources of venture capital trends

Business journals, newsletters from financial firms and business pages from regular publications offer abundant information about raising capital. Many of the sources provide frequent updates, so you'll find the latest information. As you refine your business plan for finding venture capital, continually monitor these sources.

I recommend: Yes, there is a source called Venture Capital Reporter. Access the daily articles for current happenings in the venture capital business. Check Inc.com for venture capital information. It might be wise to register your company with their "Article Alert" system. Use the news archives of both these sources to check on venture capital companies you are considering.

Find general and local sources for capital venture news

Newspapers, television and radio stations carry key financial news, including venture capital trends. These are often a good place to check for the public perceptions of venture capitalists and venture capital firms. Verify information and seek details at business or venture capital sources.

I recommend: Like many local news sources, WRAL.com provides online financial news daily. A side benefit is discussion of the impact on the local economy. Find a similar source in your business locale. Study the news about venture capital at Yahoo Finance. Research the details on the information your business finds there.

Tips & Tactics

Helpful advice for making the most of this Guide

• •  Because some venture capital news can be controversial or open to interpretations, check multiple sources when it comes to decision time.

Whether you're looking to raise venture capital to start up a business or you want to make a career of investments and finance, you'll benefit by learning about venture capital. From raising capital to working with venture capitalists, the proper venture capital education and training will prepare you in many aspects of investment capital.

You might start by enrolling in college or university finance or business classes that address venture capital funding. Attending seminars and conferences about venture capital are very informative. You'll also benefit from entering an internship with venture capital companies. Following is a more in-depth look at the ways in which you can pursue venture capital education and training:

1. Take courses that teach about venture capital at a local college or university.
2. Attend seminars or conferences addressing topics such as raising capital investors and finding sources of venture capital.
3. Get hands-on training in venture capital by completing an internship with a venture capital company.

Action Steps
The best contacts and resources to help you get it done

Enroll in venture capital courses or even pursue a degree in business or finance

Many colleges and universities offer courses covering venture capital to those pursuing a degree in business administration or finance. Even if you're not going for a bachelor's or master's degree, you might consider taking a few courses as a first step in your venture capital education and training.

I recommend: The Duke University Fuqua School of Business offers a finance class on venture capital that includes lectures and guest speakers to show students how venture capitalists work and how start up capital is raised. The Kelley School of Business at Indiana University has a venture capital and entrepreneurial finance course that teaches about many aspects of venture capital funding.

Go to conferences or seminars to learn about venture capital funding

You'll find many seminars and conferences hosted by financial institutions, venture capital firms and successful venture capitalists. Live and web seminars and conferences can provide vital and extensive information on specific topics relating to venture capital. From raising capital to how to find a venture capitalist, seminars should be a part of your venture capital education and training.

I recommend: VC Experts provides a seminar on organizing a venture capital pool, given by the chairman of the company. Find several forums and seminars on private equity and venture capital offered by the Institute for International Research.

Learn about venture capital with an internship at a local venture capital company

Few learning tools are as effective as hands-on experience. Many top venture capital firms offer internships that allow students to experience first-hand the venture capital business and work with professional venture capitalists. Interns will be exposed to sources of venture capital, venture capital funds, finding venture capital and how venture capital companies work.

I recommend: Find a summer internship with venture capital firms through the Darden School of Business at the University of Virginia. Students can find many summer internships with venture capital companies by registering at VentureLoop.