Stages of Financing & What to Consider Before Raising Venture Capital

Stages of Financing

The first stage of financing is to raise money from personal savings, credit cards, friends, and family. It is sometimes known as “golf-course preferred” when you ask people to invest in your company after meeting socially or playing a round of golf together.

You need to build significant critical mass before you can attract an outside angel or venture capital investor and eventually to secure an initial public offering (IPO). The developing of the necessary critical mass can take years of hard work.

There are some companies called incubators that will take an early stage business and guide them through the entire process of building an enterprise but will take a large percentage of your company in return.

What to Consider Before Raising Venture Capital

Venture capitalists want to see more than an idea. They want to see that you have a client list, a finished product that is beyond the beta stage, a clearly defined need in the market place, and sales. They want to see that you have significant traction in place.

Although during some periods, venture capitalists were willing to take a long-term perspective; this is a very rare phenomenon. Most venture capitalists want to see a return in a very short period of time.

An essential characteristic of a successful entrepreneur is the ability to raise capital.
Develop a relationship with your banker before you need the money. The final decision of whether to give you a loan or not rests with the loan officer. If she knows you and understands your business, your chances of receiving the money increase dramatically.

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