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Part III: Securing the Capital You Need > Potential Sources of Funds

Chapter 9. Potential Sources of Funds

Commercial banks.
Commercial finance companies.
Venture capitalists.
Credit unions.
Equipment manufacturers.
Financial consultants, finders, advisors.
Founders and industrial banks.
Insurance companies.
Investment bankers.
Mutual savings banks.
Pension funds.
Private individual investors.
Private investment partnerships.
Relatives and friends.
Savings and loan associations.
Small Business Administration (SBA).
Small Business Investment Companies (SBIC).
State Business & Industrial Development Commissions (SBIDCs).
Tax exempt foundations.
Charitable foundations.
Trust companies (bank trust departments).
Veterans Administration (VA).
Venture Capitalists (VC’s) — see next page
Source: R.T.Justis, Managing Your Small Business, ©1981, p. 156. Reprinted by permission of Prentice-Hall, Inc., Englewood Cliffs, N.J.

  • Venture capitalists. Venture capitalists (VCs) generally make equity investments in smaller businesses with high growth potential. Many specialize in certain industries, geographic regions, technologies, or investment sizes. $250,000 is often the minimum size considered. When approaching venture capitalists, keep the following points in mind:

    - A typical VC may receive thirty or more funding proposals or business plans per day, only 10 percent of which will be read. Of those read, only a few will be investigated further, and even fewer will be funded. Therefore…

    - Make sure your business plan is professional-looking, clearly and concisely written. Some VCs believe an initial proposal should not exceed twelve pages in length. Forty pages should be the absolute maximum. The facing page outlines the elements of a venture proposal.

    - Stress your capabilities and those of the management team. VCs often base their decisions on the fact they are investing in you as much or more as in your business.

    - Knowing the VC before she/he receives the proposal is a definite “plus.” Try to get an introduction through your lawyer, accountant or other contact.

    - Have a stock liquidation plan prepared so the VC will know how to exit from the investment in your business. Most VCs want to invest in ventures with high growth potential (say, 30 percent annually) and then be able to “get out” before the business matures.

    - Services such as the Venture Capital Network at the University of New Hampshire help link entrepreneurs with potential private investors and VCs.



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