When a start-up or new business cannot access funding from traditional sources due to size, assets, or their stage of development, they often turn to venture capital investments. These investments are usually made as cash in exchange for shares and an active role in the company. When seeking out venture capital investments, new businesses can expect the following:

1. Business Plan Review

The potential investors will review the business plan submitted by the entrepreneur to decide if it fits the fund’s investment criteria. If it does they will further discuss the plan with the business.

1. Research

After talking with the business and reviewing their plan, the potential investor will do thorough research. They will look into various details about the company such as the management team, market, products, services, operating history and more.

1. Investment

 At this point, if the investor is still interested, the investment will be made in exchange for some of the business’s equity and/or debt. To provide benefits to the business and minimize risks for the venture fund, the terms of the investment are usually based on company performance.

1. Investor Involvement

When businesses seek funding from a venture capitalist, they should be aware that the investor will likely become actively involved in the company. Generally, instead of making their entire investment available to the company all at once, a venture fund will slowly release their financing. Often this release of funding is coupled with the business hitting goals or milestones.

1. Exit

Venture funds tend to stick around longer than traditional financing sources, but they generally leave four to six years after making their initial investment in the company. Their exit is usually through a merger, acquisition, or IPO.

Make venture capital investments easier with the help of a corporate business attorney such as those at InnovaCounsel. They can streamline the investment and exit processes, making the agreement beneficial for all parties involved.