Unless you are seeking large amounts of capital or you have a big idea that requires a big operation, you should resist the attractive invitations from venture capitalists. Very few invest less than 10 million dollars.
Venture capitalists are owners or administrators of a large pool of funds. Most are seeking an opportunity to invest in a relatively high risk venture that has a reasonable probability to produce a high return on investment. Many are directed by people who have earned large sums through a business venture. Almost all are managers and investors who are very skillful in knowing what are the ingredients for success. They are hard-nosed pragmatists with very little compassion. Are you ready to dance with such partners?
Most are only interested in providing equity capital where they own more than half of your shares of ownership. If you were in their position wouldn't you do the same? After all, they have the capital and it is only reasonable they should have control over a successful outcome.
They ascribe a very low value to your 'sweat' capital. Your marketing data must consist of more than theory and estimates.
Just inside their front doors are a group of people who invite you to submit a business plan and then lead you through an extensive qualification cycle which results in many applicants spinning their wheels. Many venture capitalists target specific industries either because they understand that industry or the industry has high growth potential.
There are many entrepreneurs who have benefitted from funds provided by a venture capitalist. Just make sure you are the type that has a good chance at being one of the winners before investing too much of your time and energy in finding that out. Read articles written by venture capitalist or those from their point of view.
Stories from members will add great value to these maxims.
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