Visiting banks for venture capital is a relatively new idea. In the past, a business owner interested in raising money through venture capital would approach private venture capital firms. Loosened restrictions in the banking industry, as well as banks taking note of the return on investment potential, have made venture capital a banking service.

There are varieties of venture capital banking solutions available. Some banks offer funding for all levels of business growth, while others focus on mezzanine, or interim, financing. Approach banks for venture capital just as you would a private firm, but keep in mind some differences between the two, such as:

1. Bank investors are risk-averse. If your business is in a volatile sector, a venture capital bank is not a feasible solution.

2. It helps to have an existing relationship with the venture capital bank, but is not necessary.

3. With the addition of banks to the venture capital marketplace, venture capital firms are facing an increase in competition.

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

Look at the types of businesses venture capital banks are funding

You are wasting your time and the bank's time by pitching a business that is too risky or too slow growing to qualify for venture capital banking services. Research the types of businesses banks are funding before you pitch a business that doesn't stand a chance.

I recommend: VentureOne provides information about venture capital banks and firms, and it also lists companies with VC investors. This allows you to search for a venture capital bank that operates in your sector. MarketResearch.com has a variety of reports available that will help with this initial research.

Learn networking, the name of the game with venture capital banks

When you are ready to seek venture capital funds, your first stop should be your local bank. Whether you bank with a small town bank with one branch, or a national bank with branches across the country, choosing a bank where you are an account holder makes sense. If your bank does not have a private equity department, networking and presentation, as well as research, become even more important.

I recommend: Networking involves more than developing an online presence. Attend meetings of your local Chamber of Commerce to get to know other business owners in the community and possibly learn who they’ve used. If you need help finding one near you, visit the U.S. Chamber of Commerce website, which lists branches by state. If your prefer to network online, try MyCapital.com, a leading resource for raising capital and VC networking.

Consider venture capital banks a viable alternative to private firms for raising capital

Private firms used to be the only place to raise a substantial amount of funds, but there is no reason to avoid banks. For venture capitalists, it is all about the profit potential, and if your business qualifies, confidently pitch to a bank or private firm.

I recommend: For business owners, raising funds is now as simple as banking. For venture capitalists, the banking industry's entrance into the private equity market means more competition. Use a software program like the one offered by VCgate for up-to-date listings of venture capital firms, banks and other private equity groups. Funding decisions are a numbers game for banks. For venture capitalists to back a business, they want to see a 20% to 30% rate of growth, a business with a high growth potential and a clear strategy for getting their investment and return back, through sale or IPO. Protect your interest in the business by knowing what is in the contract you sign and how much the company is worth before VC funds are raised. 1000 Ventures has an online calculator that will help determine the value of your business.

Tips & Tactics

Helpful advice for making the most of this Guide

• •  Banking, for venture capitalists, is a new frontier. While the bank will expect rapid growth and high profits, like a VC firm, do not expect the aggressiveness or daring funding choices. Steady, rapid growth and a high rate of return are most attractive.