{"id":28168,"date":"2023-05-30T10:17:09","date_gmt":"2023-05-30T10:17:09","guid":{"rendered":"https:\/\/swoopfunding.com\/au\/?post_type=blog&#038;p=28168"},"modified":"2024-06-07T14:27:29","modified_gmt":"2024-06-07T14:27:29","slug":"how-to-get-venture-capital-funding","status":"publish","type":"blog","link":"https:\/\/swoopfunding.com\/au\/equity-financing\/how-to-get-venture-capital-funding\/","title":{"rendered":"How to get venture capital funding"},"content":{"rendered":"<div class=\"aivoov-player-block\">\n\t<div class=\"read_this\">Read this article to me<\/div>\n\t\t\t<style>\n\t\t\t.plyr__controls .plyr__controls__item:first-child{\n\t\t\t\tbackground:#2e9c8e !important;\n\t\t\t}\n\t\t\t:root{\n\t\t\t--plyr-color-main:#2e9c8e;\n\t\t\t--plyr-audio-controls-background:#f0f2f4;\n\t\t\t--plyr-audio-control-color:#546a7b;\n\t\t\t}\n\t\t\t[data-plyr=\"mute\"]{color:#2e9c8e !important}\n\t\t\t.aivoov-text-color{color:#546a7b}\n\t\t<\/style> \n\t\t<div class=\"audio_player\">\n\t\t<audio class=\"js-player\" controls=\"\">\n\t\t\t<source src=\"https:\/\/monky-voice-over.s3.amazonaws.com\/aivoov\/781640cc-7bc1-4bbf-9492-22dedc19678b\/474a69d3-12b3-452c-b455-1bd8b20d12b9.mp3\" type=\"audio\/mp3\">\n\t\t\t<source src=\"https:\/\/monky-voice-over.s3.amazonaws.com\/aivoov\/781640cc-7bc1-4bbf-9492-22dedc19678b\/474a69d3-12b3-452c-b455-1bd8b20d12b9.mp3\" type=\"audio\/ogg\" \/>\n\t\t<\/audio> \n\t\t\t\t <div class=\"powerd_by aivoov-text-color\"><p><a rel=\"nofollow noopener\" target=\"_blank\" href=\"http:\/\/aivoov.com\/?um_source=plugin_powered_by\" style=\"color: inherit;\">Powered by AiVOOV<\/a><\/p><\/div>\n\t\t \n\t\t<\/div>\n\t\t<\/div>\n\n\n\n<p>If you\u2019re looking for funding to help get your business off the ground or to help it expand, venture capital funding is one option worth exploring. It won\u2019t be the right choice for every business, but if you think it could work for you, here\u2019s what you need to know.&nbsp;<\/p>\n\n\n\n<h2 class=\"wp-block-heading\">What is venture capital funding?<\/h2>\n\n\n\n<p>Venture capital funding is a type of financing that investors provide to startup companies and early-stage businesses that are believed to have long-term growth potential.&nbsp;<\/p>\n\n\n\n<p>Venture capital (VC) can be thought of as a subset to <a href=\"https:\/\/swoopfunding.com\/au\/knowledge-hub\/private-equity\/\">private equity<\/a>. Venture capitalist firms tend to invest in promising startups that need growth capital and business expertise to help take them to the next level. Private equity firms, on the other hand, tend to invest in established businesses that might want a cash injection or new strategy to move them forwards.\u00a0<\/p>\n\n\n\n<h2 class=\"wp-block-heading\">How does venture capital work?<\/h2>\n\n\n\n<p>Venture capital works by providing funding to early-stage, high-potential companies in exchange for equity, or an ownership stake, in the business. Venture capital firms raise funds from investors, which they then invest in <a href=\"https:\/\/swoopfunding.com\/au\/business-glossary\/startup-definition\/\">startups<\/a> they believe have strong growth potential. The venture capitalists conduct thorough <a href=\"https:\/\/swoopfunding.com\/au\/business-glossary\/due-dilligence\/\">due diligence<\/a> to evaluate the startups&#8217; <a href=\"https:\/\/swoopfunding.com\/au\/business-glossary\/business-model\/\">business models<\/a>, market opportunities, management teams, and financial projections. <\/p>\n\n\n\n<p>Once a company is selected, the venture capital firm provides the necessary capital to help the business grow, often in multiple rounds of funding as the company meets specific milestones. In addition to financial support, venture capitalists often provide strategic guidance, industry expertise, and valuable connections to help the startup succeed. The ultimate goal of venture capitalists is to achieve a high return on investment.<\/p>\n\n\n\n<h2 class=\"wp-block-heading\">How do venture capital funding investors differ from traditional investors?<\/h2>\n\n\n\n<p>Venture capital investors tend to offer financing to startups and small businesses that are likely to generate high rates of growth and above-average returns. Venture capital funding tends to come from wealthy investors, investment banks and other financial institutions.&nbsp;<\/p>\n\n\n\n<p>VC firms have considerably more to invest (typically more than $250,000) compared to other investors because they typically pool funds from other investment companies, large corporations and pensions. In return for their investment, they get a large stake in the company. This means they will have a say in how you run your business, including your company\u2019s strategy, management and trajectory.<\/p>\n\n\n\n<p>By contrast, angel investors (or <a href=\"https:\/\/swoopfunding.com\/au\/knowledge-hub\/business-angels\/\">business angels<\/a>) are high net worth individuals who invest their own money and will typically only invest in startups and early stage businesses. Angel investors are usually experienced entrepreneurs who can also offer their own skills, expertise and contacts to help your business succeed. However, their level of involvement tends to depend on the wishes of the business and the angel\u2019s own inclinations.&nbsp;<\/p>\n\n\n\n<p>Angel investors will invest smaller amounts, typically between $50,000 and $500,000 and the return on investment will usually be smaller too.\u00a0<\/p>\n\n\n\n<h2 class=\"wp-block-heading\">What are the advantages and disadvantages of venture capital funding?<\/h2>\n\n\n\n<p>Venture capital funding comes with a list of advantages and disadvantages. some of the advantages includes: <\/p>\n\n\n\n<ul class=\"wp-block-list\">\n<li><strong>Large capital injections<\/strong>: Venture capital provides big amounts of funding that can help <a href=\"https:\/\/swoopfunding.com\/au\/blog\/how-to-scale-a-business\/\">scale businesses<\/a> quickly and support substantial growth. <\/li>\n\n\n\n<li><strong>Expertise and mentorship<\/strong>: Venture capitalists often bring valuable industry experience, strategic guidance, and a network of contacts that can benefit the business. <\/li>\n\n\n\n<li><strong>No repayment obligation<\/strong>: Unlike <a href=\"https:\/\/swoopfunding.com\/au\/business-loans\/\">loans<\/a>, venture capital does not require repayment, reducing financial pressure on the business. <\/li>\n\n\n\n<li><strong>Enhanced credibility<\/strong>: Securing venture capital can increase the credibility and visibility of a business, attracting additional investors and customers. <\/li>\n\n\n\n<li><strong>Potential for high growth<\/strong>: The focus on high-growth potential allows businesses to pursue ambitious projects and expand quickly. <\/li>\n<\/ul>\n\n\n\n<p>However, venture capital funding also comes with the following disadvantages: <\/p>\n\n\n\n<ul class=\"wp-block-list\">\n<li><strong>Equity reduction<\/strong>: Accepting venture capital funding means giving up a portion of ownership and control, which can reduce the founders&#8217; stakes and decision-making power. <\/li>\n\n\n\n<li><strong>High expectations<\/strong>: Venture capitalists expect high <a href=\"https:\/\/swoopfunding.com\/au\/business-glossary\/return-on-investment-roi\/\">returns on their investments<\/a>, which can pressure businesses to achieve high growth and profitability. <\/li>\n\n\n\n<li><strong>Loss of control<\/strong>: Investors may seek board seats or influence strategic decisions, leading to potential conflicts over the direction of the business. <\/li>\n\n\n\n<li><strong>Exit strategy pressure<\/strong>: Venture capitalists typically seek an exit within a few years, which may not align with the founders&#8217; long-term vision for the business.<\/li>\n<\/ul>\n\n\n\n<h2 class=\"wp-block-heading\">Steps to getting venture capital funding:<\/h2>\n\n\n\n<p>Follow the steps below to help you find the right venture capital funding:<\/p>\n\n\n\n<h3 class=\"wp-block-heading\">Identify your target investor<\/h3>\n\n\n\n<p>Venture capital funding won\u2019t be right for all businesses. Generally, it\u2019s likely to be more suited to you if your business shows good growth potential, has a strong brand and team in place and has secure sales channels.&nbsp;<\/p>\n\n\n\n<p>If you\u2019re in the very early stages of starting out, venture capital funding is unlikely to be the best option to explore. Instead, you could be better off seeking funds from friends and family, a <a href=\"https:\/\/swoopfunding.com\/au\/startups\/\">startup loan<\/a>, <a href=\"https:\/\/swoopfunding.com\/au\/knowledge-hub\/equity-crowdfunding\/\">crowdfunding<\/a> or business angels.&nbsp;<\/p>\n\n\n\n<h3 class=\"wp-block-heading\">Survey the market<\/h3>\n\n\n\n<p>Before deciding on the group of investors you want to target, you need to carry out some research. Venture capital firms each have their own interests, whether that\u2019s software, fintech or green technologies, so you want to find one whose interests match those of your business.&nbsp;<\/p>\n\n\n\n<p>Each firm will also vary in terms of the amount it\u2019s prepared to invest in a business, so it\u2019s important to bear this in mind when looking for a suitable investor. After all, there\u2019s no point approaching a company that usually invests several million pounds when you only need an investment of $500,000. As well as wasting your time, it can also make you look unprofessional.&nbsp;<\/p>\n\n\n\n<p>To help you, make sure you have a clear idea of the investment sum you require and then make a list of venture capital firms that are prepared to carry out deals within this range, as well as those interested in businesses in your sector.<\/p>\n\n\n\n<p>You\u2019ll then need to research these companies in detail to find out how highly rated each one is and the type of business they have carried out in the past. You could even consider arranging a quick chat with senior people at some of these companies \u2013 if you find that you\u2019re turned away, you might want to cross these companies off your list.<\/p>\n\n\n\n<p>It\u2019s also important to consider the location of your selected venture capital firms. It can be sensible to look for ones located near you and those that have invested in businesses in your area before.&nbsp;<\/p>\n\n\n\n<h3 class=\"wp-block-heading\">Create a shortlist of investors<\/h3>\n\n\n\n<p>Once you\u2019ve researched the market thoroughly, you should have a good idea of who you would like to invest in your business. You should also be armed with lots of useful information about the investment process and what to expect.&nbsp;<\/p>\n\n\n\n<p>This should enable you to reduce your list to five or six candidates. Try not to have more than 10 as this can be difficult to manage, particularly if you end up getting a lot of interest.&nbsp;&nbsp;<\/p>\n\n\n\n<p>Keep in mind that most venture capital firms will put a member of staff onto your board and will want to keep a close eye on how you are spending their money. Remember that you will need to have a close working relationship with them so choose carefully.<\/p>\n\n\n\n<h3 class=\"wp-block-heading\">Approach your target investors<\/h3>\n\n\n\n<p>If you\u2019re lucky enough to know someone at one of your target businesses, this should give you a foot in the door and enable you to set up a meeting more easily. If you can\u2019t think of anyone off the top of your head, get on LinkedIn and see how each firm might be connected to people you know. If you find a connection, you might be able to get an introduction.&nbsp;<\/p>\n\n\n\n<p>If you don\u2019t have this advantage, it\u2019s worth attending events that investors might be at so that you can get networking and introduce your business.<\/p>\n\n\n\n<p>Another option is to send an email to each VC, but this won\u2019t always be the most effective way to get the attention of potential investors. VCs get lots of emails every day, so you\u2019ll need to do this the right way to ensure your email stands out.&nbsp;<\/p>\n\n\n\n<h3 class=\"wp-block-heading\">Curate your pitch and brand message<\/h3>\n\n\n\n<p>If you\u2019re approaching a lot of VC firms, it\u2019s important not get them mixed up in your communications and make sure your templated information is concise, but provides enough detail.&nbsp;<\/p>\n\n\n\n<p>It\u2019s important to get straight to the point and grab their attention, rather than writing a long introduction. In your email, state who you are and what your business does, as well as how well it\u2019s performing. Also mention something about your competent and hardworking team. Avoid including a lot of data at this point so as not to overwhelm them \u2013 if a VC is interested they will get back to you and ask for the figures they require.&nbsp;<\/p>\n\n\n\n<p>You don\u2019t need to negotiate at this point either, so don\u2019t refer to how much of your business you are prepared to give away in return for their investment.&nbsp;<\/p>\n\n\n\n<p>What you do need to do is ensure each email you send is different and focuses on why you were attracted to that particular VC firm. This shows you\u2019ve actually considered the company carefully, rather than sending out the same email to multiple VCs at random.<\/p>\n\n\n\n<p>Once you\u2019ve sent your emails, you\u2019ll need some patience as it can take a couple of weeks to get a reply. Avoid chasing them up until this time has passed.&nbsp;<\/p>\n\n\n\n<h3 class=\"wp-block-heading\">Negotiate<\/h3>\n\n\n\n<p>Once you have found a potential VC to team up with, it\u2019s time to negotiate. Term sheets are preliminary, non-binding agreements in which the major terms of a VC investment are agreed to before anything is officially signed.&nbsp;<\/p>\n\n\n\n<p>The main sections of a term sheet include:<\/p>\n\n\n\n<ul class=\"wp-block-list\">\n<li>A funding section which outlines the financial guidelines of the proposed investment, including how much the VC firm is offering to invest and how much equity it wants in return.<\/li>\n\n\n\n<li>A corporate governance section which defines the distribution of power among the co-founders, VCs and other stakeholders, specifically related to the company\u2019s decision making.&nbsp;<\/li>\n\n\n\n<li>A liquidation and exit section which covers what happens regarding owners, investors and shareholders if the company is dissolved, liquidated or acquired. It defines who gets paid first and in what order investors and other stakeholders get paid if the company gets sold or is liquidated.&nbsp;<\/li>\n<\/ul>\n\n\n\n<p>Because term sheets are non-binding, it\u2019s important to negotiate any terms you\u2019re not completely happy with once you\u2019ve read through them. Never accept a deal you don\u2019t feel 100% comfortable with \u2013 you can always walk away and see if you can find a better deal elsewhere.<\/p>\n\n\n\n<h2 class=\"wp-block-heading\">How do I create a pitch for VC funders?<\/h2>\n\n\n\n<p>When preparing for VC funders, you\u2019ll usually need to prepare a business plan, pitch deck and product demonstration. Your pitch deck should be tailored to the specific investors to which you\u2019re presenting and it should cover the following:<\/p>\n\n\n\n<ul class=\"wp-block-list\">\n<li><strong>The problem that your product or service solves:<\/strong> You\u2019ll need to explain the problem that exists and cover how your business aims to fill the gap in the market. Try to make the problem relatable to investors, and then explain how your product or service will solve this issue.&nbsp;<\/li>\n\n\n\n<li><strong>Market size and opportunity:<\/strong> Show investors the market potential that your product or service has.&nbsp;<\/li>\n\n\n\n<li><strong>An explanation of your product and how it\u2019s performing:<\/strong> Explain how your product works and try to include testimonials from customers who have tried it out. Also, show a month-to-month breakdown of its performance.<\/li>\n\n\n\n<li><strong>Your team members:<\/strong> Talk about the people on your team, their experience and what they bring to the company.<\/li>\n\n\n\n<li><strong>Market competition:<\/strong> You\u2019ll also need to cover who your competitors are and what sets you apart from them.<\/li>\n\n\n\n<li><strong>Projected financials:<\/strong> Present three years\u2019 financial projections if you can &#8211; try to be realistic but conservative.<\/li>\n\n\n\n<li><strong>Funds required:<\/strong> Finally, you must explain how much funding you need and how you will use these funds. Try to express this as a range rather than a fixed amount as this is more likely to attract offers.&nbsp;<\/li>\n<\/ul>\n","protected":false},"excerpt":{"rendered":"<p>If you\u2019re looking for funding to help get your business off the ground or to help it expand, venture capital funding is one option worth exploring. It won\u2019t be the right choice for every business, but if you think it could work for you, here\u2019s what you need to know.&nbsp; What is venture capital funding? [&hellip;]<\/p>\n","protected":false},"author":22,"featured_media":28169,"comment_status":"open","ping_status":"closed","template":"","category":[1361,1666],"class_list":["post-28168","blog","type-blog","status-publish","has-post-thumbnail","hentry","category-equity","category-sme-support"],"acf":[],"featured_image_urls_v2":{"full":["https:\/\/swoopfunding.com\/au\/wp-content\/uploads\/sites\/4\/2023\/08\/venture-capital-featured-scaled.jpg",2560,1707,false],"thumbnail":["https:\/\/swoopfunding.com\/au\/wp-content\/uploads\/sites\/4\/2023\/08\/venture-capital-featured-scaled-150x150.jpg",150,150,true],"medium":["https:\/\/swoopfunding.com\/au\/wp-content\/uploads\/sites\/4\/2023\/08\/venture-capital-featured-scaled-300x200.jpg",300,200,true],"medium_large":["https:\/\/swoopfunding.com\/au\/wp-content\/uploads\/sites\/4\/2023\/08\/venture-capital-featured-scaled-768x512.jpg",768,512,true],"large":["https:\/\/swoopfunding.com\/au\/wp-content\/uploads\/sites\/4\/2023\/08\/venture-capital-featured-scaled-1024x683.jpg",1024,683,true],"1536x1536":["https:\/\/swoopfunding.com\/au\/wp-content\/uploads\/sites\/4\/2023\/08\/venture-capital-featured-scaled-1536x1024.jpg",1536,1024,true],"2048x2048":["https:\/\/swoopfunding.com\/au\/wp-content\/uploads\/sites\/4\/2023\/08\/venture-capital-featured-scaled-2048x1366.jpg",2048,1366,true],"image_blog":["https:\/\/swoopfunding.com\/au\/wp-content\/uploads\/sites\/4\/2023\/08\/venture-capital-featured-scaled-408x252.jpg",408,252,true],"image_podcast":["https:\/\/swoopfunding.com\/au\/wp-content\/uploads\/sites\/4\/2023\/08\/venture-capital-featured-scaled-397x298.jpg",397,298,true],"image_banking":["https:\/\/swoopfunding.com\/au\/wp-content\/uploads\/sites\/4\/2023\/08\/venture-capital-featured-scaled-30x20.jpg",30,20,true],"image_blog_internal":["https:\/\/swoopfunding.com\/au\/wp-content\/uploads\/sites\/4\/2023\/08\/venture-capital-featured-scaled-840x480.jpg",840,480,true],"image_blog_medium":["https:\/\/swoopfunding.com\/au\/wp-content\/uploads\/sites\/4\/2023\/08\/venture-capital-featured-scaled-1024x500.jpg",1024,500,true],"image_single_banking":["https:\/\/swoopfunding.com\/au\/wp-content\/uploads\/sites\/4\/2023\/08\/venture-capital-featured-scaled-80x53.jpg",80,53,true]},"post_excerpt_stackable_v2":"<p>Read this article to me Powered by AiVOOV If you\u2019re looking for funding to help get your business off the ground or to help it expand, venture capital funding is one option worth exploring. It won\u2019t be the right choice for every business, but if you think it could work for you, here\u2019s what you need to know.&nbsp; What is venture capital funding? Venture capital funding is a type of financing that investors provide to startup companies and early-stage businesses that are believed to have long-term growth potential.&nbsp; Venture capital (VC) can be thought of as a subset to private&hellip;<\/p>\n","category_list_v2":"<a href=\"https:\/\/swoopfunding.com\/au\/category\/equity\/\" rel=\"category tag\">Equity<\/a>, <a href=\"https:\/\/swoopfunding.com\/au\/category\/sme-support\/\" rel=\"category tag\">SME support<\/a>","author_info_v2":{"name":"Rachel Wait","url":"https:\/\/swoopfunding.com\/au\/author\/rachel-wait\/"},"comments_num_v2":"0 comments","_links":{"self":[{"href":"https:\/\/swoopfunding.com\/au\/wp-json\/wp\/v2\/blog\/28168","targetHints":{"allow":["GET"]}}],"collection":[{"href":"https:\/\/swoopfunding.com\/au\/wp-json\/wp\/v2\/blog"}],"about":[{"href":"https:\/\/swoopfunding.com\/au\/wp-json\/wp\/v2\/types\/blog"}],"author":[{"embeddable":true,"href":"https:\/\/swoopfunding.com\/au\/wp-json\/wp\/v2\/users\/22"}],"replies":[{"embeddable":true,"href":"https:\/\/swoopfunding.com\/au\/wp-json\/wp\/v2\/comments?post=28168"}],"version-history":[{"count":3,"href":"https:\/\/swoopfunding.com\/au\/wp-json\/wp\/v2\/blog\/28168\/revisions"}],"predecessor-version":[{"id":36887,"href":"https:\/\/swoopfunding.com\/au\/wp-json\/wp\/v2\/blog\/28168\/revisions\/36887"}],"wp:featuredmedia":[{"embeddable":true,"href":"https:\/\/swoopfunding.com\/au\/wp-json\/wp\/v2\/media\/28169"}],"wp:attachment":[{"href":"https:\/\/swoopfunding.com\/au\/wp-json\/wp\/v2\/media?parent=28168"}],"wp:term":[{"taxonomy":"category","embeddable":true,"href":"https:\/\/swoopfunding.com\/au\/wp-json\/wp\/v2\/category?post=28168"}],"curies":[{"name":"wp","href":"https:\/\/api.w.org\/{rel}","templated":true}]}}