Whether you’re an entrepreneur looking to get a new business off the ground, or looking to expand your business into new areas then you’ll have to consider business capital, which is the money that you need for your venture. When a new business has limited working capital then it can be very difficult to launch that business successfully and many businesses fail because of a lack of funds, whether that is due to low initial business capital or on-going cash-flow.
Writing a comprehensive business plan will help you work out just how much business capital you should need to make a success of your business venture and this initial planning is the corner stone of success for many businesses. However if your business plan is telling you that you need to generate more business capital then you’ll need to explore what options that you have.
Whilst there are a lot of financing options to raise business capital some of these ways such as grants or loans can be difficult or unlikely to succeed due to the restrictions imposed by the organisations providing the business capital. Traditionally businesses might have considered going to their bank for a business capital loan, but banks have become stricter on their lending criteria and are less likely to loan money to an entrepreneur who has not got a perfect or long track record. It is also rare for banks and traditional financial institutions to provide loans to startup businesses that do not have a good balance sheet already established. Small business owners are finding that the days of getting easy access to small business loans are over, and they instead have to rely on their own capital to start a business, or borrow money from friends and family members. Some entrepreneurs even start their business on their credit card. However, most credit card providers only offer cards with a high interest rate, so this is not always an attractive, or recommended option since the cost of capital is so high. It's also worth remembering that even if you believe that the dept on the credit card will only be short-term, things do not always go to plan.
Luckily business owners do have other sources of capital open to them, such as private investment and in many cases this option make more sense for a new business in the long term. Whilst any investor will expect the business they are investing in has a solid plan behind it, entrepreneurs may have a better chance to gain the vital business financing that they need. Entrepreneurs may also gain other advantages such as making strong business contacts or getting advice and help from their investors, which many traditional lenders will not be able to provide.
Venture Capital for Canadian Entrepreneurs
Venture Capital is a term often thrown around when it comes to entrepreneurs and new businesses. Most start-ups and small businesses will need some sort of business funding (also known as Equity Financing) in order to grow, yet can't secure a loan from banks yet. 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.
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.
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.
The Angel Investment Network has a range of investors who are active across a wide range of industry sectors and are are looking to make this sort of investment in your business ideas.
How to get Venture Capital
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. You'll need to be able to demonstrate what your capital needs are and if you have any capital assets such as business real estate so that the business proposition can be assessed as being financially sound.
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 business plan, and as a result, entrepreneurs in Canada 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?
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 and provide financial capital both in Canada and abroad. After signing up, you can place your ideas online and connect with investors that will help get things rolling.