Venture Capital And Sophisticated Financing
VC, otherwise known as venture capital, is private equity capital provided to startup businesses, or business in the fairly early stages of development, when such businesses indicate a high potential for future growth. VC companies, who often provide investments of cash in exchange for shares of stock in the company, seek to recover their initial investment and generate large returns on their investment through a "realization event" - an eventual IPO (Initial Public Offering) or sale of the company.
Numerous large companies and wealthy individuals often provide VC monies to startup and early stage businesses, often in additional to assistance with business strategy, planning and mentoring. Much VC money is regularly invested in early stage technology companies, many of whom indicate the potential for high growth returns on investment at a fairly fast pace.
Other sources of financing, such as business loans, debt offerings, or public issuing of stock, are often not available to smaller businesses without proven track records. Accordingly VC is often one of the few options available to startup businesses. VC is nonetheless difficult to achieve - some estimates suggest that venture capital firms may reject as many as 97% of applications outright, and perhaps provide full funding for as few as 1 in 350 for opportunities. Companies who succeed in securing VC investment often project certain sought after, but rare combinations of factors, including innovative technology, rapid growth potential, complete and logical business plans and models, experienced management teams with proven successful track records, and a likelihood of an exit strategy or realization event within 3-7 years.
Venture capital investments most often occur in the technology industries, but VC investments can and do occur in other industries as well.
Stages Of Vc Funding
VC funding often occurs in 6 stages coinciding with a company's growth, from infancy to exit strategy.
- Initial stage: This is low level, low dollar financing provided at the infancy stage of business development. Often called "seed money," initial stage financing is provided to allow a business to startup and begin developing and proving a new idea. Typical amounts range from a few hundred thousand dollars to 1 to 2 million dollars. Often initial stage funding is financed either by friends and family, or by "angel investors" - wealthy individuals who provide monies in exchange for partial ownership in the company.
- Startup: Once beyond the initial or seed stage, startup financing provides monies to allow for expenses associated with further product development, marketing and "go to market" delivery of products.
- First Round: Monies to cover early development, manufacturing and delivery of products to market. Typically revenues generated by product offerings cannot yet cover the expenses and operating costs of a business at this stage.
- Second Round: Additional working capital for early stage companies delivering products but not yet profitable.
- Third Round or Mezzanine Funding: Capital provided to allow a functioning and newly profitable company to expand and grow, perhaps to new products or expanded delivery of additional products.
- Fourth Round or Bridge Funding: Funding to finance a profitable company to allow it to implement and achieve its realization event or exit strategy. Sometimes this requires an IPO, other times preparation for a sale.
If your business seeks venture capital investment, preparation is key. VC firms receive, evaluate and reject thousands of promising business ideas regularly. To be successfully considered for VC investment, entrepreneurial ventures need to ensure they are properly structured, prepared, planned, managed and presented to VC firms. Few entrepreneurs have the knowledge and experience to know what successful qualities VC firms look for, and how to present their businesses to VC firms in a manner that will increase the likelihood of successful VC funding.
The Byrne Law Group is experienced in assisting both venture capital companies looking for assistance investing in companies, and companies looking for venture capital investment. From assistance with business plan development and evaluation, to negotiating and structuring of debt and capital infusions, to corporate structuring, shareholder agreements and management agreements to product development and marketing strategies, the experienced business attorneys at the Byrne Law Group can assist startup businesses, ensuring proper structuring, liability protection, successful business planning, and increased likelihood of outside capital funding and business growth.
Call Today For More Information
We can provide an excellent and cost effective alternative to "big law firm" representation. As a small boutique firm, we can develop a custom fee arrangement that makes sense for you. We can tailor a fee arrangement that suits your needs based upon competitive contingency fees, hourly rates, or blended hourly and contingency fee arrangements. If you are an institutional client, please ask us about our competitive rates for volume-portfolios.
Call today for further information about the Byrne Law Group's unique services for startup businesses - and join the numerous other businesses who successfully utilize the business planning and formation services of the Byrne Law Group. Call 813-413-6565 today to schedule a time to discuss your specific needs with experienced senior corporate attorney John Byrne.