Raising Money - Venture Capital Vs Angels Investment

Contrary to what you see in the press with the credit crisis and looming recession, there is simply too much money in the world at the moment, too much capital seeking too few investment opportunities. Remember, depression of the 1930s created more millionaires than at any other time (always), and now it is no different. A large proportion of high net worth individuals are striving to diversify their portfolios away from traditional investments as a defensive hedge against the stock marketVolatility. Have outperformed historically and in times of recession, the top two asset classes that the traditional markets have been commodities and private equity. So if there is so much capital in the world today, why is it so difficult to find, you need the capital?

The most likely answer to your question is, are you in that the amounts are too small to try to venture capitalists and hedge-fund manager. Finally, it is relative. When a VC has tens of millionsPounds in private equity investing, why invest in 100 or 200 start-up companies? Who can manage and see all these investments and entrepreneurs? Its hard enough to find the management sometimes! So in relative terms, investment in which you do not prove the most likely for cost reasons for them, though probably they would get more value overall.

The Hunt - VCS vs. Angels
Venture capital firms are a way to raise a serious amount of capital, but as you might imagine, there arePitfalls. The fact is essentially the loss of equity well above the 51% mark. Further the final vote on "the right to sell" is likely to include a legally binding for them. Since VCS is the main reason "ROISAP '(return on investment as quickly as possible) VCs will always be a desperate desire to reflect each transaction as quickly as possible. And they will not care where the return comes to himself or an outside party, as long as they have a massive bonus for the risk and skills for what they getinvested.

More appealing to a start-up entrepreneurs is to establish a business angel investor in the line of work, looking interested in participating, since they will either take an equity position, and (some measure of guilt or as a rule combination of the two) in exchange for their investments. They will also monitor a place on the board of directors, who use them as a platform for their investment and give valuable advice. Sometimes they can even play an active role in theOrganization and get it kick started into high gear. This freedom can set a company's ability to rapidly develop key employees and the business model to the point where it is prepared on a larger scale, the second round of funding are looking at a much lower cost make-to-equity by the proven track record within the organization.

Other advantages for the entrepreneur with access to the know-how and business networks that angel investors can be involved. In addition toThis growing trend for angel investor syndication means that entrepreneurs can be a single significant raise capital (much work on the £ 500K mark) into a single financing without the need to negotiate separately with any investor.

Health Warning:
Venture capital money is not for the faint hearted. Too often it is only for the desperate - unless your desire is to build a business with an exit strategy in mind from day 1. There is nothing wrong with such a goal in theshort time, because the returns can be expected graduation, but that many - many millions more than your side - that if you even get that far. A variety of other original creators have been forced out long before the "D-Day - big payday."

Angel investing is therefore an invaluable source of alternative financing. And there is so much more attractive and realistic for a start-up entrepreneurs. Benefits for both the entrepreneur and the fishing can be great, provided of course thatexpectations are well prepared and has from day one, and the financing agreement, thinking is structured to meet the demands of both sides.

The main difference between a business angels and venture capitalists is that VC funding is through legal agreements, which will inevitably always be venture capitalists with concepts that are almost totally unfair and unjust, while biased to come, will make angel investments are much more flexible. It is not uncommon for some angels to spare even withcorporate solicitors when drafting agreements for funding. The reason being that if a high net worth individual should choose to invest in 8 - 10 companies, the total legal bill could turn out to be over £50,000.00 (assuming a lean estimation of £5K per company which is low!) - money that could be used to fund crucial working capital or further expansion.

Executive Summary
Receiving successful venture capital funding can provide a lot more than just money to the start-up. They can bring a wealth of management talent and experience that you can advise on external growth, and how to jump over traps.

This professional advice can find a massive boost for a young company for every competitive advantage. Another major advantage of VC capital is that makes their network of contacts by the end of the difference in a successful exit (or can not).

But always remember about what a VC-funded actually means. After they have millions invested in them andregardless of whether they actually hold a controlling interest in your company they will have control over your organization and will be far more power over how the company runs and how they take their money out. They will be forced down the direction that you might not be too happy with.

The Plan
In most cases then not, it's the best start for an entrepreneur to be on their own or with help of angel investor (or a consortium if the capital requirement is too large toFunded individually) by a. After the design and development of the company, the next best approach is again to VCs, if you think you are ready to take your business to the next level and require a serious amount of capital to do so. Before even if one is approaching a VC, you must demonstrate that you have a certain degree of success in your past, which is where the first round of your financing and managing your cash flow is useful to have.

If you decide to venture approachCapitalists and agreed by some miracle they come from, you should return, then it will look from your side is crucial-to the best legal advice that you can afford for subsequent negotiations. A sentence or phrase in the first contract can decide your success or failure. VCs are consummate professionals, and you will need before a game will be in the league.

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