Alternatives to Venture Capital
There are a number of different alternatives to looking for venture capital. Rather than dealing with a large scale venture capitalist, many individuals seek the assistance of friends/family or angel investors. Angel investors work in a very similar capacity to that of venture capitalists with one major exception. Angel investors are individuals or small groups of individuals that make much smaller investments into startup businesses and new businesses. While the average venture capital transaction usually exceeds $5 million to $10 million, angel investors often seek to provide $100,000 to $1,000,000 of financing.
Angel investors not only provide capital, but they often act as a mentor to the entrepreneur or CEO of their investment. Additionally, angel investors may be more keen on investing in established industries or providing funding to a trusted manager that can run a strong traditional operating businesses. However, much like venture capitalists, angel investors are seeking a substantial return on their investment as well. The risks associated with investing in small or startup businesses are substantial. As such, they too are seeking annual returns of investment of 15% to 30%. This, however, is not a steadfast rule. If the business that the angel investor is providing financing for is established, they may be willing to accept a lower return on their investment. For instance, if an angel investor is providing capital to purchase a well known fast food franchise, they may accept a lower ROI as they understand that these franchises are highly established businesses.
Additionally, the terms of return are very negotiable with that of an angel investor rather than that of a venture capital firm. In any instance that you are working with a potential funding source, it is imperative that you have an attorney assist you with the negotiating process. There may be several legal issues that will need to be addressed in order for an angel investor to make an investment into your business. Angel investors typically do receive smaller equity percentages of businesses than venture capital firms.
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Looking For Venture Capital is a specially designed website for entrepreneurs that are seeking to raise capital for their startups, small businesses, and expanding existing businesses. The focus of the site is on Venture Capital.