A new list of the top ten Venture Capital related blogs was recently passed along to me. Before I give you the link, I want to offer these words of caution:
- Venture capital money funds only a tiny fraction of new business ventures.
- About 80% of start-up capital for new businesses comes from the entrepreneur and her friends and family. Most of the rest usually comes from loans.
- A typical venture capitalist receives hundreds of plans each year, considers only a handful of these deals, and usually funds only 3-5 deals a year.
- Most venture capital goes to businesses that promise very high growth, with the promise of high returns (70-100% annual return on their investment). They are looking for home-run deals. For example, see this story from Red Herring on MovieBeam, which is a start-up planning to offer "video store in a box" that will sit on top of your TV.
- Venture capital firms most often are looking for deals that need at least a $5 million investment, and many now look for $20 million deals. The MovieBeam deal raised $48.5 million from VCs.
- They demand a reasonably quick exit, most often about 3 years. A venture capital fund usually has a ten year life, so the VC is looking for deals with clear "liquidation events." In the past this may have been an IPO, but since Sarbanes-Oxley most of the deals are looked at for their acquisition value.
- They will want a seat on your Board, and they will carry a loud voice in the direction of your business.
- VCs are hard-nosed business people. They will fire you from the company you founded at put in their own leader in your place if they believe it will increase the chance that your business will succeed.
If you still think you are a candidate for venture capital, here is the link.
