There was a time when dreaming your own business ideas looked unaffordable and mostly people didn’t want to take risks, investing on new entrepreneurs. But venture capital is a unique helpful technique to craft your business ideas into reality, as venture capital is a service which provides financial assistance to new entrepreneurs. How to get venture capital? What will be the procedure for venture capital? Is it a secure option? These are some obvious questions which come in our mind.
The procedure of venture capital
Hunting for investors is a very difficult job, because venture capital is a process not only for providing financial services but for building a trust-based relationship between investor and entrepreneur. There are many organizations providing this facility in their own way. But to make this process easily understandable, let’s divide it in three phases:
Phase 1 – Seeding
When we want to grow a tree, what we do? We sow a seed first. In venture capital, the first phase is called “seeding”. In this phase the entrepreneur approaches an angel investor venture capital firm to provide funds for his business or product. The entrepreneur has to convince the investor, so it can be a little tricky. Sometimes, the entrepreneur is unable to express his business idea properly, may be because of lack of research on the product or business, or probably the business idea was not presented in the right way. So, if the investor doesn’t like the idea he can reject financing.
Phase 2 – Transformation
If the investor takes interest in the product, finds the idea impressive and is convinced to finance, the second phase will crop up. This phase is called “transformation”. Here the idea starts growing and is actually transformed into a product or business. This is the phase where the product first time encounters the market, so that it can get some market shares from the competitors. In this phase the market campaign starts and the attention is more on selling and promoting the product.
Phase 3 – Pre-public
The idea has now arrived to the final phase of this process which is called “pre-public”. In this phase the product is commercially presented to the public for the reason that investors can reduce the anxiety of risk they have taken while investing and the market position has also to be examined now.
Beneficial Approach for New Business
Venture capital not only helps in funding but it also includes a number of benefits for a new business. By going through above explained process the entrepreneur learns various latest business strategies which help in developing the business. Moreover, venture capital is helpful for bridging finance to many other developmental stages of business as well. As, venture capital process is evolving day by day, there are many firms which not only help in providing financial assistance but they also help in expanding a small business into a bigger one.
About the author: Uzma Tabassum is a professional blogger writing for different finance websites. She wrote this article for providing consumers with Venture capital advice.