If you're starting a business, something you may be interested in knowing more about is venture capital. What is venture capital, though, and why is it important for your business?
At the beginning, all companies are nothing more than an idea. The idea has the potential to grow into a company worth millions or billions of dollars. To achieve that goal, you may want to seek out investors. These investors help the company get the capital it needs to start creating its products and to put its goals into motion.
Early investors provide money to the company after seeing a successful, proven concept. The goal is to use the funds to accelerate the growth of the company and its sales, so that the investor can then earn based on the percentage of the company they have purchased.
Usually, investors are lucky to get back what they've spent, let alone get a return on the investment. It is possible you may have a potential investor who wants to get a guarantee of his or her money being returned to you, but if you come across that, it's a better idea to walk away. There are no guarantees.
As a business owner, know that raising venture capital is not simple. You need to have a strong idea and good team that can convince someone to invest. You should know exactly which types of investors to reach out to, so you don't seek a large investment from a early stage investor if you're looking to grow your company through its growth stage. Your attorney can help you if you're ready to sign a contract, so you know exactly what the investor expects and if the terms are good for your business.
Source: Forbes, "What Exactly Is Venture Capital?," George Beeb, accessed July 14, 2017