A lot of entrepreneurs talk about trying to secure venture capital for their companies. But few ever get beyond the talking stage, often because they don't understand what venture capitalists are all about.
Given the right circumstances, venture capitalists are capable of delivering millions of investment dollars to your business. But to tap into VC funding, you'll need to stop getting your information about venture capitalists from the rumor mill and start basing your VC assumptions on actual facts.
Myth #1: Venture Capitalists Only Fund Startups
One of the most common VC myths out there is that venture capitalists only fund startups. In reality, venture capitalists rarely fund startups. Instead, they prefer to fund established businesses that are on the verge of a major growth initiative. If you're looking for startup funding, you'll have better luck getting it from angel investors or family members.
Myth #2: Venture Capital Is About Who You Know
Another prevalent VC myth is that venture capitalists only fund their friends or close business contacts, but nothing could be farther from the truth. At the end of the day, venture capitalists are mostly interested in transforming their equity position into profit. Although it helps to have solid references, the most important factors for venture capitalists are a good business plan and hard numbers.
Myth #3: Venture Capitalists Investors Require $10 Million Investment Minimums
While it's true that you venture capitalists won't be interested in investing $30k so you can buy a replacement delivery van for your company, they don't necessarily require outrageous investment minimums. Shop around for venture capital firms that routinely make investments of $1 million or less.
Myth #4: Venture Capitalists Only Care About Money
This one is a little tricky because even though venture capitalists are primarily concerned about achieving a substantial ROI, they aren't bankers who will sit back and wait for their investment to pay off. Good venture capitalists provide expertise, guidance and leadership to the companies in which they invest. So if you're looking for a hands-off investor, a venture capitalist probably isn't the right fit for your SMB.