Angels and Vulture Capitalists
I remember reading an article on a prominent blogging site that started out discussing a group of well known Venture Capitalists coming together and discussing strategies to maintain their hold on the start-up market in Silicon Valley. Recently, that hold has had a serious set-back with the “Jump Start American Act”, which has not only given Start-ups a new means to find funding but also a new negotiation tool when looking for financing with Venture Capitalists. For the first time in ages, Venture Capitalists are advertising their services to attract Start-up companies.
Traditionally, Venture Capitalists have required 30% or more of a company’s equity to get involved with any substantial amounts of funding. Although, this seems excessive, they have touted their network of contacts and their business knowledge as key in helping grow Start-ups. (in many cases, rightfully so). Now, with so much competition in the Venture Capitalist market and with the new crowdfunding act, Venture Capitalists are faced with lower equity or offering more to support to attract Start-ups and that’s a good thing.
With that in mind, businesses still need to be savvier when dealing with Venture Capitalists and be more than ever aware of the different financing opportunities available to them.
We recommend running a crowdfunding campaign well before jumping into business with a Venture Capitalist. Even using a crowdfunding site that exchanges equity will reduce the amount of ownership one group has in the company. Additionally, an equity exchange crowdfunding site also serves as a great means to market your company.
Ultimately, the days of the Vulture Capitalists may be gone, however, many Start-ups are not in a position to wait for a crowdfunding campaign and would rather jump at any opportunity for funding. With that being the case, crowdfunding can still be used as a negotiation tool to help maintain as much equity in your company as possible and now Start-ups may be able to benefit more then ever before from a valuable resource – Venture Capitalists.
Check out our list of venture capitalists to the right (coming soon).
We’ll be interviewing them and reviewing their services to help guide you through to the best fit for your company. Be sure to do your own research!