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By Catherine Hodder, Esq. | Legally reviewed by Tim Kelly, J.D. | Last reviewed September 23, 2022
This article has been written and reviewed for legal accuracy, clarity, and style by FindLaw’s team of legal writers and attorneys and in accordance with our editorial standards.
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Suppose you have a startup business and cannot get a bank loan or line of credit. In that case, you may look for venture capital funding.
Made famous from television shows such as "Shark Tank" or "Silicon Valley," venture capital funding has been around for decades.
Startups and early-stage companies are risky investments, many fail. Therefore, it is difficult for these companies to secure bank loans. Additionally, new companies start small. So they cannot raise capital funds by selling shares of stock or initiating a public offering.
However, another option to raise money for your business is from a venture capital investment.
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Venture capital is an equity investment made in a startup company. The investor provides capital (money) in exchange for a part of the company ownership (equity). The investment provides capital for startup operations or the growth of an existing company.
There are two types of venture capital investors: venture capital firms and angel investors.
There are many stages for venture capital funds: startup, development, maturity, and growth. The venture capital firm evaluates your company and provides money and expertise. In exchange for their investment of time and money, they take a part of your company.
The first step is to make a business plan. Investors want to see your business model and how you operate your business. They are particularly interested in your projections for growth since they will share in your profits. Additionally, they want to invest in a company positioned for long-term growth potential to maximize their time, energy, and original investment of private equity funds.
The next step is bringing your equity investor into your company. You form a limited partnership or give a share of your corporation or other business entity.
Venture capital is a great way to finance your business if you can't get bank loans or traditional financing. However, you are giving away a part of your company. Therefore, you want to make the best deal possible. An experienced business law attorney can help advocate your interests and negotiate a favorable deal.
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Contact a qualified business attorney to help you navigate the process of starting a business.
We have a DIY option you can use to save time and stress.We help you:
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