New and startup businesses may get their proverbial foot in the door of venture capital firms by securing a joint venture with another established and reputable company. Venture capital funding is difficult enough to obtain as it is, but with the help of a big business name on your side, your business may walk to the head of the class in a VC firm.
In most joint ventures, an agreement is drawn up between two companies or business owners to share in a business venture strategy and share the profits resulting from it. A simple joint venture may be cross promoting a business or bundling products for merchandise sales. A more complex joint venture might be the formation of a new company to pursue a separate business prospective.
In the case of trying to obtain VC financing, it may be just a simple category joint venture that gets you in the door. Why?
Say you started a business manufacturing a new high-tech coffee or hot beverage holder. If you approached the coffee giant, Starbucks, with a proposal to sell your innovative container exclusively in their stores and they agreed, you would then gain instant credibility with any venture capital firm by having the Starbucks’ name and reputation at your side.
Or perhaps you have invented a new or innovative bottling process that has been picked up by PepsiCo. Knowing the brand and market share that PepsiCo has on the soft drink market, your VC proposal could be a gold mine with the right capitalization.
Access to Large Markets
Though VC firms do not invest as much into retail businesses, you may have a green flag with your joint venture with a big name company. They know that you would have access to a potentially large market with a company like Starbucks as your product distributor. With a large market comes the need for expanded production and manufacturing, which would be a prime reason for the need of venture capital.
An example of instant access to a large market is an innovative idea that could be used in conjunction with licensing agreements with the likes of Disney or comic book characters. A new, innovative product like glow stickers or action figures could land you a joint venture licensing agreement with Disney or DC Comics. With that green light for product development and access to an already established market, your chances at VC funding grow substantially.
Time to Market
Expanding into national and global markets takes time. It takes time to get the marketing word out and time for the customer base and demand to increase. That time span decreases considerably when you have a big name as a joint venture partner. With the credibility and customer base already established, you can more easily convince a potential venture capital firm your need for capital expansion.
When you are ready to take your new or existing business to the next level and want to try raising venture capital, don’t forget the potential and favorable possibilities with joining forces with an already established company.