Regional Venture Capital Firms and Funds

Competition for funds is less intense with regional venture capital firms
By Amy Hunter 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 firms

Regional 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.
Try:  The trained professionals at MasterPlans or Growthink, Inc. can help you compile a winning business plan to bring to your meeting with a venture capitalist. Then, use GoBigNetwork to find regional venture capital firms that are a good fit with your company.

Make sure the regional VC firms you approach are ones that will help your business

It 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.
Try:  TheFunded, Incorporated provides a forum for business owners to discuss funding sources and compare contract terms. Visit The National Association of Attorneys General to find the listing for your state. A quick phone call to your state’s Attorney General office can let you know if the firm you are courting has caused problems for other businesses.

Be ready to pay back regional venture capital funds

Venture 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.
Try:  Use the resources at FindLaw to find an attorney in your area that specializes in financial and business law. Many will look over a contract for a minimal fee. Don't take the venture capital firm's word on the value of your business; use a business valuation calculator such as the one available from KJE Computer Solutions, LLC at their Dinkytown website to determine the value you are bringing to investors.

• 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.