5 Reasons To Choose Venture Capitalism To Finance Your Startup


When the time has come to secure financing for your business, you have several options. Crowdfunding can be a wonderful solution for raising money quickly for a one-time cost. A traditional business loan may be a better long-term solution. Some people even decide to use their own credit card to launch startups because they want the flexibility of running the company however they deem fit. One of the hardest financial solutions to secure is venture capital. Venture capitalists are willing to make large investments in new businesses that have the potential for astronomical growth and huge returns on investment, so they can be excellent assets to many companies. Here are five reasons to pursue venture capitalism when you want to grow your business.

Lack of Repayment Obligation

Thousands of startups are launched each year. Unfortunately, few of them are sustainable beyond the first few years and many financial solutions require the borrower to pay back the entire loan amount whether the business succeeds or not. This means that you could be left with astronomical debt if you borrow a lot of money from the bank only for your company to fail before the loan is repaid. Venture capitalists, however, make early-stage investments that do not have to be repaid. If you work with a venture capitalist such as S-Cubed Capital’s managing partner, Mark Stevens, he or she absorbs the losses and you are not held responsible for repayment.

Exponential Growth Potential

Ideally, venture capitalists want to see a high return on their investments quickly. They do not require collateral in exchange for the money they offer you, so your business is free to grow in a variety of ways. The money provided by venture capitalists will fund product design, build inventory, launch advertising campaigns and fill orders. The investors want your company to succeed so they see a significant ROI and they will provide the funds needed to do so as quickly as possible while helping the business achieve sustainable growth.

Help With Networking

Making the right connections is essential for running a successful business. These connections help you find the right buyer for your product. If your company produces innovative medical equipment, you need to network with doctors’ offices and hospitals. If the business creates retail products, you are better off connecting with industry giants. Many CEOs have little time and it can be extremely difficult to connect with them to sell your product. Venture capitalists often already have the connections you need and can make these meetings possible. Because they already have relationships with the business owners you need to connect with, working with venture capitalists gives you an edge in marketing your product to the right customer.

Valuable Business Experience

Venture capitalists are experienced business people. They have comprehensive knowledge about the industry and understand what does and does not work. This makes them invaluable assets to startup companies. You probably will not attract venture capitalists if you have no experience in the business industry, but their experience will likely far exceed yours. They will want you to prove that you have the business knowledge required to operate a company successfully but their guidance will help you navigate the common pitfalls of the business world so your company has its best chance of success.

Trustworthy Financing

While there are many types of financing available, many of them are not trustworthy. If you rely on the generosity of friends and family to loan you the money you need, you may be put in an awkward position if they request that you pay them back before you have the funds to do so. Similarly, you could become the victim of fraudulent financing if you choose the wrong angel investor or your crowdfunding campaign fails. Because venture capitalists work as firms, you can trust the financing they offer. Each firm has a certain amount of funds set aside to finance businesses with and it is the venture capitalist’s job to determine which investments are worth the risk. If your company meets the criteria, venture capitalism is a reliable source of financing that is strictly regulated by the U.S. Securities and Exchange Commission.

Deciding which avenue of financing to pursue can be difficult. Each option offers different advantages and it is difficult to know which one is most beneficial for your business. While venture capital is not the best option for companies with small markets or those that are not interested in large growth, it is an excellent option for many startups. The guidance and business connections venture capitalists have to offer will become invaluable assets to your business and you will feel more comfortable having access to trustworthy financing that you are not obligated to repay.  By working with the right venture capitalist firm, you can provide your company will the tools and strategies it needs to succeed.