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Finding a Venture Capital Firm

Many ventures are faced with the challenging task of raising venture capital. The first part of this process is finding the right venture capital firm (VC). While this may seem simple, it isn't. There are thousands of venture capital firms in the United States alone, and going after the wrong ones is one of the most common reasons why companies fail to raise the capital they need.

When seeking a venture capital firm, there are six key variables to consider: location, sector preference, stage preference, partners, portfolio and assets.

Location: most venture capital firms only invest within 100 miles of their office(s). By investing close to home, the firms are able to more actively get involved with and add value to their portfolio companies.

Sector preference: many venture capital firms focus on specific sectors such as healthcare, information technology (IT), wireless technologies, etc. In most cases, even if you have a great company, if you fall outside of the VC's sector preference, they'll pass on the opportunity.

Stage preference: VCs tend to focus on different stages of ventures. For instance, some VCs prefer early stage ventures where the risk is great, but so are the potential returns. Conversely, some VCs focus on providing capital to firms to bridge capital gaps before they go public.

Partners: Venture capital firms are comprised of individual partners. These partners make investment decisions and typically take a seat on each portfolio company's Board. Partners tend to invest in what they know, so finding a partner that has past work experience in your industry is very helpful. This relevant experience allows them to more fully understand your venture's value proposition and gives them confidence that they can add value, thus encouraging them to invest.

Portfolio: Just as you should seek venture capital firms whose partners have experience in your industry, the ideal venture capital firm has portfolio companies in your field as well. Portfolio company management, since they are industry experts, often advises VCs as to whether the company in question is worthwhile. In addition, if your venture has potential synergies with a portfolio company, this significantly enhances the VCs interest in your firm.

Assets: Most companies seeking venture capital for the first time will require subsequent rounds of capital. As such, it is helpful if the VC has "deep pockets," that is, enough cash to participate in follow-on rounds. This will save the company significant time and effort in maintaining an adequate cash balance.

Finding the right venture capital firm is absolutely critical to companies seeking venture capital. Success results in the capital required and significant assistance in growing your venture. Conversely, failing to find the right firm often results in raising no capital at all and being unable to grow the venture.

As President of Growthink Business Plans, Dave Lavinsky has helped the company become one of the premier business plan development firms. Since its inception, Growthink has developed over 200 business plans. Growthink clients have collectively raised over $750 million in financing, launched numerous new product and service lines and gained competitive advantage and market share.

In The News:

The US wild pig population is soaring and rapidly multiplying, which experts believe is a ticking 'feral swine bomb,' according to a report on Saturday.
Archaeologists have identified the wreck of a 19th-century slave ship off Mexico’s Yucatan peninsula.
A man in Florida was bit by an alligator and nearly dragged into a canal behind his home last Sunday, all while walking his dog.
A newly published study is warning that there will be 53 trillion metric tons of plastic pollution in the world's rivers, lakes and oceans by 2030.
Newly published research suggests that some exoplanets in deep space largely comprised of carbon could turn into diamonds.
Researchers have discovered 125-million-year-old dinosaur fossils that are perfectly preserved and suggest the creatures were trapped by a volcanic eruption.
This summer, the English city was invaded by giant rats and now possibly UFOs.
A magnitude-4.6 earthquake shook Southern California shortly before midnight Friday, with aftershocks measuring 2.1 and 1.6 on the Richter scale following soon after.
NASA’s Transiting Exoplanet Survey Satellite (TESS) and the space agency’s retired Spitzer Space Telescope have been used to spot the first possible ‘survivor’ planet hugging a white dwarf star.
Hurricanes and wildfires across the U.S. have been revealed in an image captured by NASA’s Aqua satellite.

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