In a series of blogs to fund a small business, I have covered the option of crowdfunding and Fintech-based microloans. Apart from many other options to fund your business. Let’s consider the option of Venture Capital way too.
VC funding might make us think it would get things more complicated. As VC will get into your business process and even suggest good things to make a bigger and much better profit-making firm. Many firms have grown to be a part of NYSE and unicorn after they got an investment from VC. VCs just don’t come with a money purse, they even make you a professional firm to compete in the industry, grow multi-fold and increase profits to be the next unicorn.
What you mean by VC and how they help you fund a small business
Small businesses can bootstrap until the time the business is stable. But then if you need to throttle for more growth, it will need cash to drive. The growth needs multiple resources, from employees to supplies, technology to new processes. These would be investments to make the firm ready for the next big.
Venture Capital or VC firms, on the other hand, help such firms to drive their growth. VCs invest in your firm as equity financing. Private investors normally back VCs and even pool funds from pension savings, community corpus, large corporations, and private individuals.
The interest of VC is to be part of your small business by owning a percentage of the firm in return for the money invested.
Start a side hustle and make an enterprise to invite a VC to fund
How does VC work and how it will fund my small business?
VCs backed the 3 big firms Apple, Google, and Microsoft in their times when they just came out of the garage to grow to what they are today. The primary driver for such firms was VCs and what kind of VCs they opted for.
A lot of research backed VCs invest in firm. They make your proposition smarter to be part of the next unicorn.
They crowd us with VC firms, but the right one is more important. Here are some steps involved to get a fund from VCs.
- Introduction: There are multiple templates on the web to make the right introduction document. This should help VCs to know about your business and opportunities.
- Pitch deck: Intro is done, and you made an appearance to be a potential firm. You would need to work on the pitch deck. You will be called to present and Q&A after that
- Terms to sign: If passed your pitch deck stage, they will hand you a terms sheet with docs to sign. It will cover the investment, stake dilution, and SOPs to follow.
- Acceptance: When you accept the terms after the due diligence, you would not see back and hit the throttle to be the next unicorn.
What type of VC is the right
- Seed fund by VC: The name suggests that it’s a time when the idea is germinated. The seed fund is to start the firm and work on the product. It helps for initial R&D and to make MPV.
- Startup funding: This is when the firm is incorporated, and the founder is in search of partners to finance and be part of the founding team.
- First-Stage funding: The firm has started and even has active customers. The revenue is good to bootstrap. But you think to ramp up the sales. They need the fund for the ops, marketing, and product manufacturing process.
- Second-Stage funding: This is needed when you want to ramp-up sales and production facility for the next big.
- Bridge funding: Normally done when a firm wants to go private with a bigger firm or initial public offering (IPO). We use bridge fund when you need to buy VCs stake back into the firm.
There are many VC firms across America. Some are very specific to the stages of investment and for vertical. You can collaborate over the web with VCs. Just for your reference, here are some best VCs.
Start business form home, here are the ideas for you
1. Funders Club to fund a small business
It’s an offshoot of YCombinator. Funders club started in the year 2012 and has made a platform where an entrepreneur can apply for VC funds. We complicate it to member here. Their evaluation process to be a member is complicated and around 2% get a berth on Funders Club.
But if you follow the steps right to make a great pitch, I am sure you will win a way to be part of the Funders Club invested firm.
MicroVentures have a long history of VC funding. It has the credibility of being a pioneer in VC funding. It has invested in many early-stage startups. Traditionally started as an angel investor, but not graduated to be VC.
You would find multiple businesses requesting funds on the MicroVentures platform. This makes it tough to come out as a winner. You can keep this as a variety of options to get funding.
3. Accel to fund in your small business
VC firm that invests in people and companies. It has the credibility of investment firms to make the unicorn. Example- Atlassian, Braintree, Dropcam, Etsy, Facebook, and many more
They have the keenest interest in Direct-to-consumer brands, restaurant tech, HR tech, E-Commerce, and banking. In case you fall into any group, then you have a greater chance to get the fund.
4. Sequoia Capital to fund a small business
It has invested in over 1900 firms across the World. Incorporated in the year 1972, it’s a fund keen to invest in modern sales, SaaS, and Fintech.
Sequoia’s headquarters are in California and have a branch office in China, India, and Israel.
5. Benchmark VC to fund a small business
It seeks to be the first investor in tech firms. They focus on early-stage investment in various industries. They help in planning big for any new firm and exited from 200 firms so far with huge profits.
Benchmark VC gets your funds and makes you prepare for the next big firm. Small business to enterprise.
6. Index Ventures to fund a small business
Invested in over 1000 firms and exited in over 200 firms. The index is headquartered in Geneva. Index interest to invest in verticals like Direct-to-consumer brands, HR tech, In-Store Retail tech, banking, and beauty products. If you fall into these verticals, then you have a better chance to succeed in evaluation.
It supports entrepreneurs to create a new market and helps them dominate.
VC is great in all ways, but there are certain things to keep in mind while you sign-up for VC. Here is the list of pros:
It provides good and, sometimes,
|Pros of VC to fund a small business||Cons of VC to fund a small business|
|1) A large amount of financing. This helps to only focus on growth.||1) It can stress you with loss of ownership. There are some stories about entrepreneur vs investor tiff.|
|2) They come with expertise on board.||2) Normally, entrepreneur ends up with a minority stake|
|3) This helps new bees in entrepreneurship.||3) The process of VC is complex and time-consuming|
|4) Wealth is the driver of growth and success, Benefits out of networking||4) It will not see the advantages right away|
So guys about VC to fund a small business. I wish you all luck and keep reading this place for more details on Side Business to make money.