Venture Capital - A Two Way Street
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Although the concept of venture capital has been around for well over two hundred years, it is only really in the last twenty or thirty years that companies have specifically sought to boost entrepreneurialism and profit through the development and growth of successful businesses. Many of the venture capital companies trading today were initiated in the eighties or nineties.
Although this idea has proven to be popular and successful for both investors and for those struggling to take their business to the next level, there is widespread concern amongst new entrepreneurs or would be business owners that the current economical climate and general concern with the future economic outlook is liable to put off many would be investors. The concern is that venture capital investors are likely to be less interested in business, especially those with a higher degree of risk attached.
It is argued by many that for this reason it is not advisable to look to develop or found a new business because obtaining financial backing is likely to be almost impossible, stalling the company and preventing you from taking advantage of the markets you perceive to be available.
These concerns and worries are certainly very understandable, but in fact they are quite unfounded. Despite, or even perhaps because of the economical turmoil which the entire world is facing at the moment, there are not only emerging markets and opportunities developing which are there for the taking, but investors are seeking opportunities to ride the storm out on the back of growth which they perceive as being viable businesses.
The point is that in order to secure an investment, either from a venture capital firm, private investor or business angel, or even a venture capital trust, your business has to present itself in a clear, unambiguous way as highly likely to succeed. This has clearly always been the case, but today it is of critical importance to make sure that you do not rush in with the first new business idea you have, but that you take time to work out the business plan, you take time and effort to research the market, and you make the effort to put together a plan that can clearly demonstrate the potential for growth and success.
If you can do this within the current financial situation, then you will almost certainly find yourself gaining interest quicker than ever before. Right now is perhaps the best time of all to show optimism and determination to succeed. The number of investors hasn't decreased, but the number of businesses has, and the growth of those already trading has not grown as quickly as forecasts would have suggested. With a good business plan, even if it is only a reasonably modest one, most entrepreneurs or small business owners should find themselves achieving more attention than they would have done only a couple of years ago before the markets crashed.
However, it is important not to confuse attention with investment. It might be easier than before to gain attention, but if you have not carried out your research, and have only a sketchy business model, then you can expect to see the potential investors walking away very quickly. It is more important than ever to do your homework, and be fully prepared.
But this shouldn't be seen as bad news at all. It's always been important to be prepared, and the current climate only highlights this need. By highlighting the importance of preparation, research, marketing and understanding, this means that today any business which succeeds in not only gaining venture capital interest, but also succeeds in gaining investment, has a rock solid base and is more likely to succeed and grow to at least expectations than might otherwise have occurred during times when investors may have been happy to take slightly larger risks.
Another aspect of venture capital which can often be forgotten is that it is not all about money - it is very much about getting people with experience and business knowledge to become involved in the business process. This can only be seen as a good thing, and having the right investor on board can do wonders for the growth and success of any business. Focussing entirely on getting the investment can be missing the point.
With an investment from a company or private investor, who will then be represented on the board, it can mean the difference between surviving, and succeeding. Don't opt for the first investor to wave a bundle of notes at your business plan. The investments are there for the taking, so don't assume that in today's climate you should jump in to the first investment option to present itself to you. Venture capital is a two-way street, and if you forget that fact, you could get run over before you've even started.
Naz Daud is the founder of CityLocal. This Franchise Opportunity is for people who would like to work from home and be their own boss.
