Securing Second and Third-round Venture Capital Financing

 


Visitors: 431

Widget sales are booming – the competition is scrambling, demand is up, and the books are finally treading water. Your core management team has big ideas for the future of Widget Inc. Opportunity is abundant; but how will you fund that next big leap?

As your start-up matures, obtaining second- or even third-round funding may allow your business to expand and grow into new opportunities identified after your business was established. If your product or service has proven itself in the marketplace, you may be a candidate for an additional round of funding.

Some possible uses of post start-up funding include:

* Penetration of new markets, either by industry or geographic location

* Development of new products or services that compliment your key lines of business

* Acquisition of competitors, staff and/or facility expansion, or new equipment

Damage Control

If your company is struggling to make ends meet, post start-up financing is not an effective way to address red ink.

Consider other methods of debt management such as refinancing, streamlining systems of production, and bootstrapping before looking for additional funding. Investors will not be interested in extending additional funds to companies that have not yet established themselves firmly in the marketplace.

Identifying Post Start-Up Funding Sources

The best source for post start-up funding may be your original investment partner. However, sometimes asking your investor-partner for additional funds can be a lot like asking your parents for a raise in your allowance. You’re going to have to really prove a need for it, and even then, your original funding source may have woke up on the wrong side of the financial plan.

Should this prove to be the case, there are additional sources to consider, including:

* Lending institutions (banks)

* Venture capital firms

* New private investors

* Other professional service providers within your core management team

If you developed a list of potential investment partners prior to start-up, renew your contact with these individuals. By telephone or letter, convey the success your product or service has experienced, as well as your purpose for the post start-up funding. With a solid track record in hand, you may be surprised to find how many potential second-round investment partners you have.

In addition, you’ll be in a stronger position during the negotiation process, meaning you won’t have to give up as much control to achieve your desired result.

Tips For Maximizing Post Start-Up Funding

* Don’t commingle funds. Avoid falling into the trap of using new funds to level the books. If you obtained additional funding for expansion, do not deviate from the plan. Address any cash flow problems or existing debt service independently from your company’s expansion needs.

* Learn from past mistakes. Undoubtedly, your company’s start-up phase was a learning experience unlike any other. Recall the lessons learned from handling your initial start-up capital. Now that you’ve established a strong working relationship, call in your management team to gather additional opinions on the best way to disburse funds on each project.

* Look for new opportunities along the way. As you implement your expansion plan, be on the lookout for ways to streamline and maximize the results of your efforts. Don’t be afraid to upgrade your plan; remember that your business plan should be a “living" document, able to flex as the status of your market and the general economy change.

Jim D. Ray is a seasoned entrepreneur and president of Web Presence, a national web design firm exclusively serving the small business market sector. To learn more, or for a free quote for your own web site, visit the Web Presence web site at: http://www.web-presence.net

(662)

Article Source:


 
Rate this Article: 
 
Venture Capital Funding
Rated 4 / 5
based on 5 votes
ArticleSlash

Related Articles:

Venture Capital Financing: Is It Within Your Reach?

by: Dave Lavinsky (October 06, 2005) 
(Business/Entrepreneurialism)

Business Financing A Peak Into Venture Capital

by: Nazir Daud (July 02, 2008) 
(Business/Venture Capital)

What is Venture Capital

by: Terry Fitzroy (August 03, 2007) 
(Investing)

Is Venture Capital Right for You?

by: Dave Kauppi (November 17, 2006) 
(Business)

Venture Capital

by: Damian Sofsian (May 31, 2006) 
(Business/Entrepreneurialism)

The Venture Capital Cycle

by: Low Jeremy (June 07, 2007) 
(Business)

What is Venture Capital - A Brief Overview

by: Terry Hart (September 24, 2008) 
(Business/Venture Capital)

Venture Capital in Arkansas

by: Low Jeremy (June 10, 2007) 
(Business/Venture Capital)

How To Raise Venture Capital

by: David Feinleib (July 09, 2006) 
(Business/Entrepreneurialism)

Venture Capital Funding

by: Bill Pratt (January 08, 2008) 
(Business/Venture Capital)