Venture Capital Firms: How to Select the Right One

All things are not created equal and the same is true of venture capital firms. They differ in a great many ways so when you are looking for venture capital investment you need to be able to narrow down your search to those firms that are likely to be the most inclined to work with you.

1. Fund Size

Chances are your business is going to need extra equity capital in the future. If the VC has a large fund at their disposal they are probably going to be inclined to make future investments. Also follow-on rounds can be a whole lot easier if you use the same investors.

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2. Location is Key

Most VCs prefer to invest close to their actual location because it means there is a greater opportunity for interaction between them and the investee. It is simpler for you if you are spared having to face time zones and geographical barriers. This is why the majority of VCs tend to operate within a 100 mile radius of their offices.

3. Additional Investments

Try to determine what other business the VC firm has invested in because it will be beneficial to you if they have worked with other businesses related to your field. Very often they form a network that can prove useful for all concerned parties. If you have synergies with these businesses your firm will look far more interesting to VCs.

4. Their Leaders

As with any business a VC firm is run by people and they all possess different areas of expertise. They look for investments in areas that they are familiar with. Choosing the right firm with the right leadership means that you have the benefit of knowing that they will support the growth and start-up of your business by utilizing their knowledge and expertise.

5. What Stage is Right?

Many VC firms are reluctant to invest in specific phases of a business’ development. Whereas there are those that prefer to provide seed capital there are others that prefer businesses that are already well established. Select a firm that invests in businesses at the stage at which yours is.

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6. Related Industry

When selecting investors this is one of the most vital aspects. Obviously a VC firm isn’t likely to invest in a software company if they usually fund medical device businesses! It makes no difference if your business is likely to be a huge success because chances are they will not invest in you.

Devoting a little time to screening potential venture capitalists prior to contacting them will save you both time and effort while simultaneously increasing the likelihood that you will secure funding.

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