Venture Capital: Pros vs. Cons
Venture Capital: Pros vs. Cons
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Home Page > Business > Entrepreneurship > Venture Capital: Pros vs. Cons
Venture Capital: Pros vs. Cons
Posted: May 08, 2010 |Comments: 0
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When looking for venture capital is important to weigh the pros versus the cons. As you already know, there are a number of ways that you can raise capital without having to give up a substantial equity portion of your business.
In regards to the pros of raising venture capital, not only will you have access to the funding needed to grow your business, but these firms can also provide you with additional capital as the business expands. Additionally, venture capital firms have extensive contacts within your industry. They can assist you with acquiring customers/clients, marketing your business, and managing the expansive growth of your company. Venture capitalists can also (and they will) sit on your board of directors to provide guidance as your business expands. If you business is extremely successful, your venture capital firm can assist you with taking your business public.
In regards to the cons of looking for venture capital, you will be required to give up a substantial amount of control and equity. Venture capital firms often place stipulations within the operating agreement and investment contract that can separate you from your business if they feel that you are not doing a good job of running and expanding the business. Additionally, one of the cons that you will face when dealing with venture capital firms is that they will ultimately set your compensation, stock options, restricted stock, and other forms of executive compensation. One of the other issues faced by your firm when looking for venture capital is that VC firms often have the right of first refusal to make additional investments into your business as your expand and require additional capital. Again, you should always have an attorney present when working out these issues with a venture capitalist, angel investors, or other type of private investors.
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venture capital, venture capitalists, raising capital, small business financing, business financing, business finance, startup business, startup businesses, equity capital, private investors
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