How Business Women Can Get Venture Capital
With a dash of optimism for 2010 and beyond, women business owners say their venture capital investment plans are also on the rebound.
For their companies, 65 percent of women expect improvements to their business prospects this year, according to a National Association of Women Business Owners (NAWBO) survey. Likewise, capital investment plans are on the rise: 21 percent of NAWBO members plan to increase capital investment this year, up from 17 percent in early 2009.
“With the market for early-stage capital beginning to bounce back, I’m once again fielding calls from entrepreneurs wanting to know how much of their company to give away to investors to raise the money they need to launch their businesses or take them to the next level,” writes Rosalind Resnick for WSJ.com (How to Win the Valuation Game).
Resnick is the founder and CEO of Axxess Business Consulting in New York, an expert in developing business plans and financial projections for start-ups. She is also the author of The Vest Pocket Consultant’s Secrets of Small Business Success.
“In the past,” she notes, “I probably would have advised my client to hang tough and keep looking. In today’s market, with smaller amounts of early stage capital available and venture investors looking to scoop up bargains, I’m urging my clients to draft a deal that’s palatable to both sides.”
Winning Cash for Your Business
Forbes.com provides 10 Tips for Bagging Startup Cash:
- Stick with what you know. “Establish a company in a field you are familiar with.”
- The first investor should be you. “This will show investors you approach later that you are serious about your long-term commitment to your firm.”
- Approach friends and family. Friends and relatives are most likely “to take a chance on you and support you in other ways, such as contributing free labor.”
- A bank can be your friend. You should “establish a relationship with your banker before applying for a loan.”
- Know the difference between angel investors and venture capitalists. Angels come in early. Venture capitalists come later. “They take a percentage of your company with the hope that it will become large enough to eventually be sold or go public.”
- Network. “Women tend to lack contacts among individuals and companies looking to invest in startups. Attend venture-capital conferences to meet investors.”
- Be prepared. Have a detailed business plan.
- Seek the right investors. Know which kinds of companies that investors work with. “Don’t waste their time.”
- Understand equity capital. Know what the offer terms are.
- Discuss your business plan openly. Many entrepreneurs are afraid that someone else might steal their business ideas. “But if the loan officer or investor can’t discuss your request with others, the idea will be dead in the water.”
Myra M. Hart, a Harvard Business School professor and authority on entrepreneurship, agrees that it’s important to float your business idea in the beginning.
“The real success will depend on your organization and execution as well as the basic concept,” Hart says in an HBS Working Knowledge article, How Women Can Get More Venture Capital. “And almost everyone who is willing to talk about the idea finds that it continually gets refined and better. It also gets people to buy into the idea and to understand you, your capabilities and your business concept before you come asking for money.”
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