This guest post comes from Richard Charnley, Investment Manager at Northstar Ventures.
Five Reasons to Consider Venture Capital Investments
Whether you’re a small business looking to expand or you’re a startup that needs seed funding, you might have considered seeking investment from a venture capital firm. Unlike traditional bank loans or private equity, venture capital can help support higher risk companies in the early stages of development. Here are five reasons why you should consider speaking to a VC Investment Manager if you are looking to grow your company.
There’s a saying that ‘it’s lonely at the top’. If you’re the Managing Director or CEO of a company sometimes it can be difficult knowing who to talk when you’re facing a big decision. This is why it can be helpful to have a VC Investor on your team: you can draw upon their experience with other startups and SMEs.
Venture capital often works through a string of networks, made up of investment firms, consultants, angel investors and of course the startups and SMEs themselves. By raising capital through a funding round you are likely to connect with a strong network of useful contacts. Whether it’s someone who can mentor you through the early stages of your business, or someone who can help raise funds in the future, the network VC investment can link you with can be invaluable.
Venture Capitalists are experienced working with startups and small businesses. This means they understand that each business is different and a ‘one-size fits all’ approach (which you might find with a typical bank strategy) does not work. They are able to evaluate the business requirements and tailor a package that meets the needs, stage and exit route of the business and the management team.
Venture capital typically has a stronger focus on growth when compared with other financing options. This can be particularly helpful for businesses in the early stages of trading who need to focus on quick growth in order to succeed. VC Investors may also accept initial losses for growth purposes – they can see the bigger picture.
This is probably the most obvious reason people consider venture capital investment! Venture capital funds often have the ability to invest larger sums than might be available from a bank or on your credit cards. They also have the ability to fund the same business more than once, if the business has started to grow or is being scaled up.
It is worth noting that not all companies are right for VC investment and vice versa. VC investment is usually only suitable for companies where the management team and shareholders are focussed on the future sale of the business.
About Northstar Ventures
Northstar Ventures is a North East-based venture capital company that has been operating since 2004.
It is currently looking to invest from £50k to £0.5m in innovative high growth businesses and social enterprises across the North East region.