Many artistic entrepreneurs will consider seeking venture capital to launch their business, to grow their business or to rebrand. But is venture capital the way to go?
For most, this will be an enormously challenging endeavor, perhaps one of the more difficult of one’s life.
Venture capitalists typically work as a firm of investors, seeking a financial return between 20 and 35% over the next three to five years time. Is your business structured in such a way, so as to attract venture capital?
Here’s a bit of what you are going to need:
- Experienced and capable management
- A history of having profited, if possible
- A well developed, professional business plan with realistic budget and forecast
- Fill a great gap in society. What does society or your community need? Fill that.
- Have a revolutionary concept. Revolutionize how we as people fulfill our needs.
- A great pitch. Know your concept so well, that you can easily articulate its value in both long and short form.
Venture Capital is great for those who are seeking to reduce their risk and attract necessary funds, but the potential for profit has to be there, as does a demonstrated profit and strong management team. After all, the venture capitalists want to reduce their risk as much as possible, while simultaneously enhancing their chances of profit.
Is venture capital the way to go? If you are a large company or your product is hugely expensive to develop, highly successful, while simultaneously building a potential for return for the creator, then this is a good option to explore, as difficult as these funds can be to obtain.
For others, they may want to look towards Angel Investors. These are individuals or “Angel Networks” who personally invest their private monies.
Angel investors are typically easier to engage than venture capitalists are.
But ultimately, I like to give the advice of Bootstrapping, whenever possible. Bootstrapping is the least risky of options, as one only creates with the resources they have at hand–no investors, if possible, and no loans. Though a business may grow more slowly in going the bootstrapping route, in the long run, one grows more slowly, but also more organically. At the same time, the bootstrapping individual or company maintains greater artistic control and profit potential, as neither have been watered down with other people entering the project.
Jim Hart is the Director of Arts Entrepreneurship at Southern Methodist University.
Originally Posted on The Hart Technique on September 19, 2012
