The economy is gloomy – but not so gloomy that venture capital firms are holding off from making investments!  Entering a market segment may be tough to acquire new consumers who are saving more than spending, but VC firms are saying that a good business idea is always a good investment option for them, even in tough economic times.

 

Experienced VC firms know that there is always consumer interest in a great product or service.  However, a startup company may have a tougher time acquiring VC funding due to the larger amounts of capital needed.   In today’s economy, venture capital firms are choosing fewer startups and focusing only on those who have the best chance at survival.  Many VC firms are widening the gap from startups and investing more in Series A or Series B stage companies that have a proven track record of success.  

 

Why Business Stage Matters

 

Startup companies are still in development, adding members to the leadership team, performing market research, and performing product development and testing.  Usually there is no revenue coming in, but large amounts of capital are needed from VC firms to continue the business launch.  Due to the risk of failure or delayed success, and the higher potential of loss on a large investment, VC firms look more toward Series A or Series B financing.

 

Smart and savvy entrepreneurs should be able to build a team, develop a product or service, and launch their business without the need for VC funds.  Even if it means bootstrapping and raising capital from friends, family, and partners, there are ways to acquire funding to get a business off the ground.

 

Once a business launches and gets initial traction, there is better potential for success.  Management is in place and employees are working.  Business is coming in, but profit may not yet be experienced.  It is at this Series-A stage that many VC’s will take a look at new businesses and invest with less risk than a true startup.

 

Series-A vs. Series-B Funding

 

What do you need in your Series-A business to acquire VC funding in contrast to a more experienced Series-B business?  Hope!  In a Series-A stage, companies have not yet reached their full potential, and therefore, hope for significant profits and growth still exists.    

 

Series-A funding can help a business take off into breakeven territory and even profitability.  Funds from Series-A financing are generally used to increase productivity, cut costs, build infrastructure, and push distribution and sales. 

 

With a growing company, a VC firm can receive a greater return on their investment than with an already profitable Series-B company.  If you have hope, you can gain respect by building a company from the ground up and keep the momentum going.  And that hope can translate into a successful VC financing effort.

 

 

 

 

 

 

Tags: angel investor, angel investors, Find funding, funding, vc, venture capital, Venture Capitalist

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