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Venture capital is long-term share capital for unquoted companies who maybe start-ups, expanding their business, diversifying or even buying out a parent company. With loans or debts from banks or other lenders, there is a legal obligation to repay the capital with interest, irrespective of the success or failure of your venture. This capital is normally secured on business or other assets, which can ultimately be liquidated. With venture capital you receive capital in exchange for equity in your company. Your investors’ return on that capital is dependant on the business’ success and profitability and ultimately through an ‘exit’ agreement which may include selling their shares or selling the whole company to realise their capital.

Primarily this type of investor is looking for companies with relatively quick and high growth prospects and which are run and managed by highly experienced teams. They will seek to maximise their investment by helping to increase the company’s value, providing your business both capital and business experience and advice, without managing the business on a day to day basis. Investment is normally sought to last between 3 and 7 years.

The way venture capital firms raise their funds – for example from institutional investors, insurance companies or pension funds – affects their investment preferences and the type of finance they will offer. It is vital to only contact venture capital firms that specialise in your sort of requirements. This criteria may include:

• The stage/type of investment – Seed (funds required to develop a business concept), Start-up (funds required to setup company and/or develop products), Early Stage (funds required to commence trading), Expansion/Development/Growth (funds required to increase production, diversify or for new product development).
• The industry sector – e.g. manufacturing; media & entertainment.
• The amount of investment – e.g. 100k or £5million. Some specialist & regional venture capital firms will invest under £100k, but 'Business Angels' are often the best route for smaller amounts.
• Geographical location – there are nationwide and regional venture capital firms.


VENTURE CAPITAL & BUSINESS ANGEL SOURCES
OTHER SOURCES OF RAISING MONEY