Would You Prefer a Venture Capitalist or Other Alternatives for Your Start-up?
Thursday, April 5, 2018, 6:00 AM | Leave Comment
When the entrepreneurial bug bites, the next thought is capital. Where to get it from, who to get it from; these issues occupy your every waking thought.
That is until you chance across the term venture capital in one of your business journals and you have a light-bulb moment.
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What is venture capital?
This is money that you are given by private investors of special financial institutions to start up your venture or develop an already existing one. Your financiers then get a stake in your business.
Look for more information on venture capital sites like MK Venture Capital to get better acquainted with this form of funding.
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Venture capital or loan?
You already know thatwhen you get financed via venture capital, you must allow your financier to have a stake in your business. If that is fine by you, then you should celebrate the fact that you have no loans with interests to pay back.
When a financial institution or a money lender loans you money, they expect it back after sometime, with interest. You are contracted by your lender and you commit yourself to payback the money loaned to you plus accrued interest over a period of time.
You must provide collateral for your loan just in case you are not able to pay it back.
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Other means of financing
Other ways you can get financing for your business are:
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Angel investing
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Seed financing
The main difference between these two is timing in the financing company’s life cycle, amount of money and the structure of the deal. Timing means that the finances can be provided at the earliest stages of a startup business whereas with venture capital, you are not provided with the capital at the beginning stages of the business.
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Funding
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Venture capital:Funds businesses that have been around for a while even if they may not necessarily be profitable. The valuations of these businesses are higher and the capital offered is higher too.
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Angel and seed investing:Funding can be as low as $2000 and as high as$1M. Compared with venture capital, which deals in millions to hundreds of millions of dollars, this is a humongous difference.
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Deal structure
The deal structure for angel investing is different from venture capital. The deal structure for angel capital is set to reduce legal spending and transaction costs while working to speed up the rate at which the investor and startup can come to an agreement.
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Crowdfunding
What is the difference between venture capital and crowdfunding? Equity, that’s what. Venture capitalists get a stake in the business they fund while with crowdfunding, the financiers do not. Crowdfunding is a high-risk platform. The startup has the potential to fail to deliver.
Tip
If you want to grow your business from the start, get an angel investor to avail the venture capital without touching your own money. This way, you have the capital you need and as soon as you need it.
When you are loaded with information, it is easier to make a decision on whether you should go with venture capitalists or other alternative financiers. Check outMK Venture Capital and other venture capitalist sites for more information.
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