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Determining if -- and how -- you should pursue venture capital

Securing funding to get a business off the ground can be one of the biggest obstacles for a business owner. Investing in a startup is risky, so it is critical that you consider carefully the source of funding you wish to pursue as well as the approach you will take to attract a potential investor.

One option you may be considering is venture capital. While this may seem like an exciting -- and seemingly easy -- option, the fact is that securing funding from a venture capitalist is far more difficult and complicated that TV and movies can make it seem. 

Is venture capital the right solution?

This type of financing is high risk, and investors typically expect high reward as a result. The investor or firm will typically expect rapid growth.

If this does not sound like a good fit, there are numerous alternative financing options to consider, including:

  • Traditional bank loans
  • Community development finance institutions
  • Partner financing
  • Grants
  • Angel investors
  • Crowdfunding

Pursuing venture capital

However, if this is realistic, then a venture capitalist can be an attractive fundraising option. In these cases, you must prepare accordingly. Set yourself apart from other companies and hopeful startups. It can also be wise to connect with someone in the venture capitalist's network.

You will also want to present your business in the best possible package. Have a story; showcase previous successes; capitalize on the excitement of your business.

You must also back up the attractive packaging with solid, persuasive data. This includes deadlines, realistic projections, industry research, clear plans for how you will use the financing, and an exit strategy. These figures could take a venture capitalist from wanting to invest to actually investing.

Other resources

As an emerging business owner, you may know everything about your company. However, securing financing may not be in your wheelhouse. As such, it can be wise to get help from other resources.

Partnering with experienced professionals in your industry can add credibility. Accountants can help with the financial projections and presentations. Attorneys can help you connect with venture capitalists and ensure any contracts you sign are in your best interests. Utilizing these resources can help you get your business off the ground and moving toward success.

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