If you’re looking for capital to grow your business, you have a number of financing options to explore.
One of these options, and possibly the best option for startups, smaller businesses and businesses that have seen rapid growth, is to seek capital from venture capitalists.
Here’s everything you need to know about this type of capital investment, and why it might be the best option for you and your business.
The basics of venture capital
A venture capitalist is a person, group of individuals or a business that invests in other businesses.
It’s a form of private equity and equity financing. Venture capitalists will provide capital in return for an equity stake in a business. This is why venture capitalist firms are looking to invest in startups with low cash flow, and businesses with huge growth potential.
It’s a high-risk form of investing from the capitalist’s side but has the potential for a high return. In some occasions the investors will also be able to offer some help in the way of expertise and experience, too.
Why would you use venture capitalists for your business?
Venture capital is a good option for a lot of businesses but is primarily an option for startups and businesses that have a lot of potential for growth.
If you’re in the position where you are unable to secure a traditional business loan or if you don’t like the terms and commitment of a loan – offering an equity stake gives you the opportunity to secure funds.
You can then use the capital to grow your business. This growth will give a positive return to both you and your company, as well as the venture capitalists that invest in your company.
Advantages of working with venture capitalist firms
There are two huge advantages to working with venture capitalists when raising capital for your business;
• The first is that you’re able to secure funds without having to agree to the rigid terms of a bank loan.
• The second is that venture capitalists are often invested in the businesses and industries they’re investing in more than just financially. With the added risk of losing money if your business struggles. They’ll do due diligence in your industry, and it’s an added vote of confidence if they see the potential to invest in you.
Disadvantages of working with venture capitalist firms
The only real disadvantage of raising venture capital is selling an equity share of your business. Obviously, you may not have any choice at the time, and it’s a win-win in the short term, but you need to be aware of how this will affect your ownership in the long-run.
How can you get venture capital?
Here at IW Capital we believe in supporting the growth and development of startups and SMEs in the UK.
We offer venture capital loans as part of our private equity portfolio and we’re happy to hear from any businesses that think this might be the right type of funding they need to see their full potential.
You’re in capable hands, here at IW Capital we have an executive team with more than 50 years’ collective experience. We know that more than 50% of new businesses in the UK fail within their first five years due to a lack of funding. So, we understand how important raising the right kinds of funds is.
If you would like to find out more about IW Capital, click here to download our free brochure.