There are entrepreneurs out there, with awesome business ideas, but they do not have the needed capital, to fund their ideas, while some lack the basic discipline of pushing their ideas into the sphere of reality.
No matter how promising a business is, there will come a time, when the injection of more funds will be needed, to boost it.
That point is where investors come in and the funds invested, is called, Venture Capital.
Wikipedia defines Venture Capital, as a private Equity Capital that can be provided, at various stages, or, funding rounds.
Common funding rounds include, early-stage seed funding in high-potential growth companies, (Startup companies) and growth funding, is also referred to as Series A.
Funding is provided, in the interest of, generating a Return On Investment, ROI, through an eventual exit, such as a merger and acquisition, (also referred to, as M&A), or, Initial Public Offering, (commonly known as, an IPO), of the company.
Venture Capital is the finance provided, by investors, to Startup companies that they believe, based on empirical facts, has the potentials, to have long-term growth.
Venture Capital is, usually given by wealthy individuals, Angel investors, financial institutions, etc.
There are 5 stages when it comes to Venture Capital financing. Prior to the 5 stages is the Seed Stage
Seed Stage, (Breakfasting): This is considered, to be the first stage, where an individual approaches an investor and outlines his/her ideas, with the hope that, the investor will buy into the idea and want to fund it.
This stage also entails that, the individual will have to pitch the idea and after pitching, the investor will carry out some investigations, to verify every detail about the business and if it is satisfactory and economically viable, the investor will be willing to fund it.
Start-up Stage: This is the stage, where a business plan is presented, by the business owner, to the investor and the business idea is then funded by the investor, after scrutinizing the business plan and found to be in order.
A prototype is developed, in order to test its feasibility and workability in the market. If at this stage, the prototype created did not generate the needed buzz in the market, which the investors want to see, they may pull out of the deal.
The Second Stage: This is the stage, where the business owner evaluates how the product is doing in the market and how it is faring with other competitors.
If the investors see that, the product is not doing badly in the market, they will move on to the next stage, but if they envisage that the venture is doing badly, they may decide to change the management team of the product, or, just decide to restart this stage again, until it is gotten right.
If the product is doing extremely badly in the market, the investors may just decide to pull out completely, from funding the product.
Third Stage: This is where the product is faring moderately and expansion is needed. Extensive and extended marketing is needed at this stage.
A massive marketing campaign will be carried out, in order to reach out, to more consumers, which boosts the market sale of the product.
The investor will expect the management team, to cut down production costs.
IPO Stage, (Final Stage): This is the stage, where the investors acquire their profit and pull out.
The business owner/venture, can, then, decide to merge with other companies and also introduce follow up products, to attract new clients.
A Startup should, therefore, know that getting funded by investors, is not a walk-in-the-park affair, but with hard work and nose for details, they stand a good chance of getting their Startup businesses funded.
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