Venture capital funding for startups
According to Josh Kopelman, at First Round Capital, venture capitalists are like jet fuel salesmen. He adds that while jet fuel is useful when building a jet, it becomes significantly less useful when building a motorcycle. Although there is nothing wrong with building a motorcycle, they are not built to sustainably use jet fuel. This metaphor has been applied to venture capital as well as it may not always be right for every business.
What do venture capitalists look for when considering startups for investment?
Venture capital firms tend to look for certain characteristics—such as outlined in this article—before considering it for an investment. These and more factors can help you understand the requirements of venture capital firms:
A business must have the potential for an exit: For a venture capital firm to get an adequate return on their investment, there has to be a pathway for the company to eventually have an exit to an acquirer or at least to the public markets.
The company must be scalable: A company’s scalability would also be a determining factor in being considered for an investment by a venture capital firm. A VC firm will generally want their investment to be made in the growth of a business.
The product or service must be valuable to the society: This goes without saying. When setting up a business, your product or service must identify a problem and provide a solution for it. VC firms tend to look for the creativity and usefulness of the product or service.
How to know if venture capital funding is right for you?
Even if your business is perfect for venture capital funding, it may require due diligence on your part to know if your business would need funding at the stage that you are in. Once you acquire venture capital funding, the investors in your business would also have a say into the functioning of your business in order to safeguard your investment.
If you are unable to find an investor who is not as interested or invested in your business idea as you are, the course of the business could get affected due to the difference in the vision. This is why it is important to do your due diligence before choosing the right VC firm for your business.
Successful companies have been built without venture capital funding. Many exceptions have seen startup founders bootstrap their startup company as they ultimately did not want to give up control of their business or want to scale their business based on their own optimised potential.
Venture capital funding can be a helpful push to help your business pivot in the right direction. If you need help to get started with and startegise your business in the UAE, you can get in touch with our experts at Ascent Partners.
Strategise, startup and scale with Ascent Partners
Ascent Partners provides bespoke business setup services to help individuals looking to setup their next venture in Dubai. With over 70 years of collective industry experience, we work alongside you to strategise and startup while enabling you to have the freedom to scale your business as you want.
Get in touch with us today at ask@ascentpartners.ae or at 04 422 7339 to know more.