Drawbacks to Venture Capital, Angel Investment, and Private Equity
Article by Matthew Deutsch
There are many drawbacks to working with a venture capital firm funding purposes. Their many drawbacks to working with a private equity firm when you are seeking funding. Angel investors love to work with businesses that are already profitable. The current economic climate has made lending very difficult. If you business is profitable then a SBA loan may be a better fit for you as venture capital firms, angel investors, and private equity groups do not like risk.
A business plan consultant can provide you with a deep tremendous amount of information as well as a business plan that is needed when you are thinking about the drawbacks of working with of angel investors. Venture capital firms typically want 80% of your business. Many texts have been written about angel investment in both a positive light and negative light. Tangible property is not interesting to angel investors, which is one of the major drawbacks to working with these individuals.
It is very important that you have an extensive amount of industry experience as it relates to the business that you intend to start or expand. Within a business plan that you write, you should always take a five year view of the business in order to get the best deal possible from a venture capital firm, angel investor, or private equity group. You should be aware of the complications as it relates to small business financing. You should create lists of prospective investors that would take a look at your business plan or your business prospectus. It is imperative that you work with a properly qualified attorney when you are looking for angel investors. Some investors aggregate their operations so that they mimic a small private equity firm that operates on a local basis.
Hard money mortgages are becoming a very popular method of generating a very high return on investment for me to investors. Venture capital, and one of its main drawbacks, is only reserved for large scale businesses. Angel investors like high returns on investment which puts added pressure on you. In some instances, angel investors may act as hard money lenders due to the high interest rates charged by this type of financing. Many small business investment companies are not directly looking to take a very large percentage of your business, which eliminates many of the drawbacks that we have discussed throughout this article. As such, you may want to consider working with a SBIC instead of one of the aforementioned financing companies or private investors.
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