In recent years, there has been a tendency for companies looking to expand their operations to reach out to Venture Capitalists (VCs) to help generate the funds required for growth.
By partnering with a skilled VC, you’ll vastly increase your chances of successfully growing your company – not only through additional funding but also by taking on board the considerable skills, knowledge, and network of contacts investors can bring to your business.
However, finding and choosing the right VC for a particular firm can prove challenging for many business owners. Below are just a few tips you could follow to ensure you discover the best VC for your expansion.
Understand the different types of VCs and how/when they invest
All VC companies are different, and most tend to specialize in particular types of companies – for example, concentrating only on software, fintech, or manufacturing businesses. You should also be aware that most VCs invest in firms at different stages of development (e.g. seed, early-stage, etc). Knowing these details will make it far more likely you’ll be able to whet the interest of a potential investor. The key at this point is to recognize the importance of research.
How to find VCs that invest in firms like yours
There’s little point approaching a VC that has no proven interest or shareholdings in companies that are similar to yours – this is almost a sure-fire sign that they’ll similarly not have any desire to partner with you.
However, in today’s modern, connected age, it’s easier than ever to research company data online and see the respective owners and shareholders. Additionally, you should consider using an investment api to gain a better understanding of potential synergies or investments that might not be immediately obvious through manual research alone. Through methodical research, you’ll be able to draw up a shortlist of potential VC firms that fit your needs.
Why preferred time of investment is important
Almost all VC firms have a preference regarding when they invest in other companies – most often linked to the potential risk/benefit of early/late speculation and the possible Return on Investment (ROI). You need to find a VC that targets your firm’s particular stage of development in the business lifecycle.
Don’t forget the potential importance of location
The internet has made business global, but that doesn’t mean that many VC firms prefer to invest purely in nearby firms that are close to them. It’s not uncommon for investors to draw on their local contacts or experience to help develop a firm, so remember to check the location of the companies they’ve invested in relative to where they are.
Draw up a list of potential VCs and reach out
Factoring in all the considerations above, you should now have a fairly comprehensive understanding of the VCs that might be a good fit for investing in your firm. Remember to consider only those VCs with a proven track record of helping companies achieve their goals. As mentioned above, a VC shouldn’t just bring money to the table – they should also offer mentoring, guidance, experience, and contacts that will help nurture and foster your firm’s ongoing growth.