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Venture Capitalists and Business Angels

Venture capital and 'angel' investment seems like an attractive

alternative to personal loans - you're asking people to invest

their money in your business in exchange for a share of the

profits. While it can cost you more in the long run, it means

that you won't be borrowing money as a loan that needs to be

paid back whether your business makes a profit or not.

Venture Capital

Venture capital is the 'big' option - you should only really be

looking at it if your home business concept is

technology-focused and would be able to make a bigger profit if

you had access to better hardware. Venture capitalists mainly

look for businesses that have the potential to grow really big

really quickly, but will also want everyone involved to be

experienced and confident.

Approaching a venture capitalist is a lot like approaching a

bank to ask for a loan, except you need to be a lot more

convincing. The person you meet will be a specialist in whatever

industry you're planning to enter, and they'll run a mile if you

don't seem one hundred percent sure of everything. Make sure you

research any venture capital company before you meet with them,

to see what they look for and who their existing clients are.

Remember that you're being scammed if they ever ask you to pay

anything, and be wary of anyone who insists that they won't sign

an NDA (privacy agreement) before they see your idea - they

might be planning to hand it to one of the companies they've

already invested in.

Be prepared for competition for venture capital funding to be

fierce. Really, the best way to get it is to build a good

version of your business on a small scale and then wait for them

to come to you. Also, you should be aware that accepting venture

capital funding will give the venture capitalists a significant

say in how your company is run. They will try to force you to

grow the company as large as possible, before cashing out

somehow, whether it's a sale or selling shares. They will,

effectively, take over your company and maybe help you get rich

- not too much fun if you're out to start your own business and

get away from the typical corporate way of working.

Angel Investors

Angel investors are like venture capitalists on a much smaller

scale. They are 'real people' - individuals who will invest in

smaller companies. For home businesses, angel investors are a

much better idea than venture capitalists.

Angels tend to behave more like a business partner. They'll

invest, say, half the start-up funds, and then take a personal

role in the day-to-day running of the business. This contrasts

with venture capital companies, which have a tendency to be

faceless and issue you written demands to be get more

profitable. A business angel brings with them experience and

knowledge as well as money, and they can be a great asset to

your business.

Still, you need to remember that they're in this to make a big

profit - when you build your business with the help of an angel

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investor, you need to be able to show to them how they're going

to be able to get twice as much out of the business they put in,

and how soon. This doesn't necessarily mean that your business

needs to grow rapidly, but it does mean that whatever you plan

to spend their money on needs to be some kind of tool for making

back far more than the original investment over a relatively

short timeframe.

Staying Independent

Of course, the best way to stay completely independent is to

avoid accepting any outside investment. If you really need the

funding, though, there are still some ways to take it and stay

as independent as you can.

Make sure you keep at least 51% of your business. However many

investors you have, you need to keep hold of 51%, otherwise it's

not your business any more. Don't feel like you're entering some

kind of big system where you're lucky to be and you have to play

by these people's rules - if you have a genuinely good business

plan, then they're the ones who should be begging you for the

opportunity to invest for such a good return. If all else fails,

you might be able to persuade your friends and family to invest

just as much on far better terms.

About the author:

Original Source: Articles-Galore.com

Information supplied and written by Lee Asher of The Home Income Portal

Home of Serious Online Business Options.