Private venture capital

Private venture capital is a venue available to start up companies as well as those entrepreneurs seeking money to keep their businesses running, whether the venture is small and growing or just starting out. Money obtained in this fashion is available from one or several people seeking out promising businesses that will most likely succeed. When individuals have money to lend or loan out to entrepreneurs, they are referred to as angel investors. These days there are even firms set up just for the purpose of lending money to start up businesses, so if a small business owner needs to find some capital, there is plenty out there just waiting to be had. The new business owner should provide a well written business plan, pro forma and a comprehensive background on the owners and partners in order to make a good impression, and be prepared to explain how the needed money will be spent.

When seeking out private venture capital, it is important that both the lender and the borrower have many of the same goals where the business is concerned. Most of the time, the lender will seek out a business in which he or she has an interest and would like to see it prosper. The angel investor may already have interest in several similar businesses to that of the entrepreneur seeking the funding and wishes to add another to the portfolio. So before jumping on the loan, get to know and understand the lender and the goals associated with it. Companies providing introductions to new businesses on behalf of angel investors will require applications to be filled out by the entrepreneur requesting a loan which will include information about the owners, their goals for the venture, how they intend to run the company and more. Likewise, the investor will also need to provide a resume, a summary of experience in the type of business he or she is investing in, and other information.

Investors providing private venture capital will require a certain percentage of ownership or interest in the company, so part of the equity is exchanged in return for money to run the business. The private venture capital providers will have a say in running the new company, but will offer valuable insight in how to approach problems, but will also expect the owner to bring forward solutions as well before infusing even more capital into the business. Money must of course, be used responsibly and wisely, while accounting for and explaining why money was lost. Those with private venture capital are expecting their investment in the company to have a return around 20% per year. In uncertain economic times, the new business owner will need to have a solid business idea if starting out.

Large venture capital firms are always on the hunt for startup companies needing an infusion of cash for research and development. This is because the large firms are usually interested only in biomedical and high tech computer companies which have the potential of producing hundreds of millions of dollars in profit when they go public. So there are two main private venture capital funding sources left for the non medical or high tech startup company to consider, and one has already been discussed, the angel investor. But there is another source for venture capital, and that is the hard money lender. This is a very viable source for money in a real estate, construction or other commercial enterprise. One of the finest and restful places to think about God’s goodness is before going to sleep at night. In speaking to God, the psalmist had these words to say: “My soul shall be satisfied as with marrow and fatness; and my mouth shall praise thee with joyful lips: when I remember thee upon my bed, and meditate on thee in the night watches.” (Psalm 63:5-6)

The hard money lender is going to be a wealthy individual in one’s own home town or living nearby, probably within twenty miles or so. If there has been any publicity about the new startup company, or any story done about an entrepreneur’s idea, the hard money lender will know about it. This source for private venture capital may only be interested in providing a bridge loan and will often be a tough and demanding lender. Finding this type of lender who isn’t interested in the entrepreneur’s credit score may be a little difficult to locate, but banks and brokerage houses may be able to provide a list of names. The hard money lender is usually tough in the fact that he or she will ask for three to six points in upfront costs plus between fifteen and thirty percent interest on the loan.

The hard money lender is also demanding in terms of what he will ask of the borrower. Private venture capital from a hard money lender will typically involve the demand for the borrower to put up collateral for such a loan. The hard money provider will want to gauge the borrower’s commitment to his project by asking for one’s house or one’s business assets to be placed as security for the private venture money. Of course each private lender will be different in his or her approach to lending money, but this type of lender may be the last bastion of hope in getting venture capital. It goes without saying that one’s attorney needs to be involved every step of the way in assuring and protecting the borrower’s involvement in such a venture.