Whilst it can be an excellent source of financing for the right business, it is certainly worth bearing in mind that it may not be suitable in all instances. Still, should a business be in real need of cold, hard capital funding, it can provide an invaluable boost.
The decision to seek this type of financing must be preceded by a dispassionate assessment of the ability of your business to deliver what the investors providing this type of finance will be looking to achieve.
In a nutshell, the primary aim of venture capital investors is to realize a large profit from investment in your company. This means that they usually enforce rigid criteria and insist that you satisfy this before they release funds.
In our experience, the criteria of the majority of venture capitalists tend to focus on the following:
The ability to answer with a resounding “yes” to the final question is of paramount importance to venture capital investors. They will want to achieve substantial return on invest on investment and the prospect of a shortfall in this area will be unpalatable to them. If you are unsure whether your business can meet this proviso, it would be advisable to seek other options like small business funding.