Venture Capital is medium to long-term finance, provided through the purchase of shares in unquoted companies by venture capital funds, firms, trusts and private investors, to help them expand and succeed profitably.
Venture capital could help in most business situations where the total finance being sought is in excess of £100,000. Whether you are trying to find finance for a business start-up, development and expansion, buying into a business, considering buying out a division of your own company, turnaround or regenerate a company, venture capital investment could be part of the solution.
Because the venture capitalists get their rewards by selling their shares at a profit at some time in the future, they have a vested interest in seeing your company succeed and grow. They frequently provide technical input and can also help acquire other financial resources to strengthen your operation, allowing you to focus on growing a profitable business.
Murray Commercial Finance have access to many sources of venture capital to facilitate sourcing and introduction of funds, putting you in contact with the most appropriate partners. All venture capital sources have different maximum and minimum values they accept, often specialising in a specific business sector or even geographical region and some may look for board representation.
Securing venture capital finance is significantly different from raising finance through factoring debt, or negotiating a loan from a bank, or capitalising assets through leasing. Whether your company succeeds and grows or not, lenders have a legal right to interest on a loan and repayment of the capital or principal advanced. In contrast, venture capital is finance in exchange for a stake in your company – the investors are shareholders depending on the growth and profitability of your business to make a return.
Many small companies that seek venture capital can be characterised as “merely providing a reasonable quality of life for their owners”. These businesses are neither dynamic nor expansive and generally would not be considered suitable for venture capital investment. This type of business is unlikely to provide the potential financial returns to make them interesting to an outside investor.
“Entrepreneurial” businesses are somewhat different. These organisations are vibrant; they have ambitious goals and potential for rapid growth, well beyond their current size. Generally, unless a business can demonstrate the potential for outstanding turnover growth within five to seven years, it will probably not be sufficiently attractive to a venture capital firm.
Venture capital investors are drawn to companies with high growth prospects, which are managed by well qualified, competent and determined teams with a “can-do” attitude to turn their business plans into reality. In these cases, provided there is a strong likelihood of success, the venture capital provider is interested in companies at all stages of development, from business start-up to management buy-out.
The key points most venture capital firms and funds will look for are:
- Your company must have high growth potential
- You and your management team must be committed and ambitious to grow your company rapidly
- Your company must have a product or service that is commercially viable
- Your product or service must demonstrate a significant competitive advantage or USP
- You and/or your management team should have relevant industry sector experience and track records of achievement
- There should be a clear team leader and the team should have complimentary and acknowledged skills in administration, finance, marketing, sales and so on
- You and your team should be willing to formalise and present the business plan
- You, the other current shareholders and the management team should be willing to see shares sold to an external venture capital investor
- The venture capital provider must have confidence that the possible reward justifies the risk
- The potential financial return on the investment must meet the investment criteria of the venture capitalist firm or fund
If you believe that you can match most of these criteria now or in the very near future, then venture capital may be the right solution for funding the next stages of the development of your business. Complete the Quick Enquiry Form and Murray Commercial Finance will provide you with competitive venture capital proposals.