The last few types of financing available are a little out there but if you attain them you are really in business. If you are beyond the startup phase, have initial revenues coming in, a quality team in place, and a clear path to eventually sell the business or go public in an IPO, you could be ready to approach the funding pros – venture capitalists (VCs). But because they funded the dot-com and biotech bubbles and were badly burned, VCs now have higher standards than ever. Still, they remain a serious player in the investing world. Keep in mind that their funding is very time-sensitive. VCs look to get their money and profits out as quickly as possible. They are a great source if you are planning for meteoric growth and will require further business financing in the future to achieve it. The upside is that they typically have millions to spend and more where that came from. Also they can use networking to continue funding. The downside is that it must be a fast growing and popular business, however millions could be at your fingertips.
If you need to get to market quickly or perhaps short-circuit the “no name, no credibility” game, strategic investors can help. These equity financiers get their name because they come from within the industry you are targeting and find what you are selling to be “strategic” for their business objectives (such as somehow complementing or enabling the products or services they sell). But beware! They can swamp your business with opportunity, seduce you into reallocating your companys’ resources in a lopsided way, restrict you from dealing with their competitors as your customers, and even cancel their business relationship with you on a whim! Be sure you know what you are getting yourself into. These are what big money lawyers make their bread and butter off of. However, they enhance your credibility in the industry and the money can have access to manufacturing and marketing. On the downside the dependency can be tricky and they can prohibit you from selling to their competitors.
Just like Goldilocks, you will have to make a choice. Some small business financing options will be too complicated and some too risky. Others will offer too little or too much. But if you do your homework and ask for the right amount from the right source at the right time, you will secure the financing for your startup that is “just right” and be well on your way to business success! There are many different free state agencies that can help you to both learn about financing and about how to develop your business.
Next time we will be discussing theses different areas that you can find help.