Venture Capital

Guide to Venture Capital Funding

For the entrepreneur looking for finance for their fledgling business there are a lot of different options available, from self-funding, and angel investments to grants and even venture capital funding.

The financial landscape can be quite confusing for the brand new business owner but understanding what how VC investors operate and provide VC investments is fairly straight forward. So this begs the question whether venture capital funding is suitable for your own business?

What is Venture Capital Funding?

Venture capital firms are portfolio companies that invest in a number of different businesses at any given time. Some venture capital firms will work within a particular sector or business ecosystem, whilst others, will have a more diverse portfolio and provide investment capital to a many different business types.

For example, you might find that a venture capital firm will provide fundraising for firms that work in the healthcare, crypto, robotics, fintech or high-growth technology companies. There are venture capital companies that have been created specifically to target emerging companies that target these sectors.

You can even find venture capital firms that specialize in the people they invest in, so for example there are women-led venture capital companies. So whether you're a tech-business in Silicon Valley, near San Francisco or an emerging company in Mumbai, if your proposition has great growth potential you'll find a venture capital firm that is interested in your business.

How Venture Capital Helps Entrepreneurs

Venture capitalists can invest anywhere up to the billions, expecting a return of up to 30% over a five to ten year period. At the earliest stage of investment, this funding is called seed capital, covering initial marketing, developing and manufacturing expenses.

After several years, even if the business has not yet turned a profit, the company can seek working capital to further expand its line of products, operations, inventories and technologies. When the company or firm has matured, bridge financing allows the company to go public and investors can restructure stockholder positions and possibly leave their agreement (also known as an “exit strategy”).

When one company provides the capital investment to a different company, this is known as corporate venture.

To take your business to the next level with VC company you can expect a lot of meetings between management teams and individuals like the CFO and general partners.

Limitations of Venture Capital Funding

When it comes to finding investment for your early-stage start-up business, where do you begin? Although many entrepreneurs might consider looking for venture capital investment, often these kind of investors are looking for a business with a relatively high valuation, that has made inroads and needs investment to take the business to the next level.

For entrepreneurs with a start-up or small business that are looking for early-stage investment then VC investors might not be the right fit, instead private investors may be more interested in the business proposition.

The reason for this is fairly straight forward. The venture capitalist investors normally look for established businesses that are looking to grow larger, perhaps to help it reach the point of the Initial Private Offering (IPO). Once a company has reached IPO then you can expect larger investors such as pension funds to start investing in an organization.

On the other hand, in comparison, private investors are typically less risk adverse and look for big returns on their investments. In some cases, you might find a VC firm backing an individual if they have a solid track record of entrepreneurship, but this isn't as common as them making VC funding investments into larger, more established organizations.

With potentially high returns, the risk often increases, and no more so than with start-up businesses. This often does not deter the angel investor, but venture capital investors like those found on Wall Street are less enthused by these kinds of prospects.

To get angel investment for a new business you will need to ensure that your business plan is comprehensive, as the investors will need to do their due diligence before they invest in the business prospect.

How the Angel Investment Network Helps

Members of the Angel Investment Network can connect with potential angel investors and generate venture capital for their business.

Private equity investors are looking for start-up businesses that they can invest in. So if you have a new venture that you are looking to get off the ground, then by signing up to the Angel Investment network you can find a partner who can help secure your future and provide the investment needed to take your idea or early-stage company to the next level.. If you are running a business start-up in Singapore and are looking for additional finance for your business, you may have heard about venture capital.

Venture Capital is a term often thrown around when it comes to entrepreneurs and new businesses. Most start-ups will need some sort of business funding (also known as Equity Financing) in order to grow. However very few if any new businesses will be able to secure a loan from a traditional bank or financial institution. As a result, venture capital is one potential option; one that works as an opportunity for investors as well, as they will often get a strong percentage of what the company makes, should things progress as planned.

How Venture Capital Works

When investors view an entrepreneur's idea or company that they think might succeed, they will offer to make a venture capital investment in exchange for a high percentage return. In some cases, the investors will also want to play a key role in the decision-making process. For entrepreneurs in Singapore this can be beneficial since they will be able to leverage the experience of the venture capital investor. For example, an entrepreneur may have a good business idea and want to take it overseas to China, the rest of Asia or worldwide, but have little to no experience with exporting to these alternate markets. Having an investor on-board with this kind of experience can provide valuable insight and help form a successful strategy from the get-go.

The main types of Venture Capital come either via a "Venture Capitalist", which is a high net worth individual or private company investment, or via what is known as a "Venture Capital Fund", also known as a Limited Partnership, which pools together funds from various parties. This kind of partnership is quite common in Singapore. You will find investment groups and clubs looking for sound investment opportunities.

How to get Venture Capital in Singapore

For your business to obtain venture capital investment, you will need an idea or concept that will grab the investors' attention and get them interested. Beyond just an entrepreneurial idea, they will want to see that the ideas and growth plans are realistic. They will want to know how much time it will take to achieve such goals and may even take into account your business acumen and overall demeanour.

One of the common mistakes that entrepreneurs make when seeking venture capital is relying too much on their ideas. Investors will want to see strategies devised to back up this plan, and as a result, entrepreneurs in Singapore should seek advice from both legal and financial advisors, as well as making sure that their team has some experience when making this pitch.

How to find Potential Investors?

The Angel Investment Network has a range of investors who are active across a wide range of industry sectors and are looking to make this sort of investment in your business ideas.

Signing up with the Angel Investment Network is one way. We have a database of entrepreneurs, along with angel investors that are looking to make investments both in Singapore and abroad. After signing up, you can place your ideas online and connect with investors that will help get things rolling.