What Is Venture Capital?

With debt financing, you would acquire debt but still have complete ownership of your company if you pay back your loans on schedule. However, venture capital is equity funding for high-risk and high-growth companies. A high-growth company would be one that could provide a return for the venture capitalist in a three to seven year period either through the sale of the business or a public offering (stock offering).

Usually, venture capitalists want to invest a minimum of $1 million; although you could ask for an amount as low as $200,000 and still find investors if you provide a strong business plan that demonstrates fast growth at a high return for the investor in the neighborhood of 30 to 50 percent.

Keep in mind that a venture capitalist may require a large portion of your company's equity and will want a position on your board of directors. The venture capitalist will want a return on their investment and may exercise any of the following to that end: call back the funds, selling of the company, renegotiating the deal, etc.

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