Here we've compiled 10 techniques, including factoring, from the tried-and-true to the experimental.
The following schematics shown here are called the process data models. All activities that find place in the venture capital financing process are displayed at the left side of the model.
Each box stands for a stage of the process and each stage has a number of activities. At the right side, there are concepts. This diagram is according to the modeling technique developed by Sjaak Brinkkemper of the University of Utrecht in the Netherlands.
Seed stage[ edit ] The Seed Stage This is where the seed funding takes place. The investor will investigate the technical and economical feasibility feasibility study of the idea.
To open this portal, the venture needs some financial resources, they also need marketeers and market researchers to investigate whether there is a market for their idea.
To attract these financial and non-financial resources, the executives of the venture decide to approach ABN AMRO Bank to see if the bank is interested in their idea. After a few meetings, the executives are successful in convincing the bank to take a look in the feasibility of the idea.
After two weeks, the bank decides to invest.
They come to an agreement and invest a small amount of money into the venture. The bank also decides to provide a small team of marketeers and market researchers and a supervisor.
This is done to help the venture with the realization of their idea and to monitor the activities in the venture. Risk[ New venture financing ] At this stage, the risk of losing the investment is tremendously high, because there are so many uncertain factors.
The market research may reveal that there is no demand for the product or service, or it may reveal that there are already established companies serving this demand. Young shows that the risk of the venture capital firm losing its investment is around Kerr, Josh Lerner, and Antoinette Schoar, however, shows evidence that angel-funded startup companies are less likely to fail than companies that rely on other forms of initial financing.
A business plan is presented by the attendant of the venture to the venture capital firm. A management team is being formed to run the venture. If the company has a board of directors, a person from the venture capital firms will take seats at the board of directors. The prototype is being developed and fully tested.
In some cases, clients are being attracted for initial sales. The management-team establishes a feasible production line to produce the product. The venture capital firm monitors the feasibility of the product and the capability of the management-team from the board of directors.
To prove that the assumptions of the investors are correct about the investment, the venture capital firm wants to see the results of market research to see if there are sufficient consumers to buy their product market size.
They also want to create a realistic forecast of the investment needed to push the venture into the next stage. If at this stage, the venture capital firm is not satisfied about the progress or market research results, the venture capital firm may stop their funding and the venture will have to search for another investor s.
When there is dissatisfaction and it is related to management performance, the investor may recommend replacing all or part of the management team. Example[ edit ] Now the venture has attracted an investor, the venture needs to satisfy the investor to invest further.
To do that, the venture needs to provide the investor a clear business plan, idea realisation, and how the venture is planning to earn back the investment that is put into the venture, of course with a lucrative return.
Together with the market researchers, provided by the investor, the venture has to determine how big the market is in their region.
They have to find out who are the potential clients and if the market is big enough to realise the idea. From market research, the venture comes to know that there are enough potential clients for their portal site.
But there are no providers of lunches yet. To convince these providers, the venture decides to interview providers and try to convince them to join. With this knowledge, the venture can finish their business plan and determine a forecast of the revenue, the cost of developing and maintaining the site, and the profit the venture will earn in the following five years.
After reviewing the business plan and consulting the person who monitors the venture activities, the investor decides that the idea is worth further development. Risk[ edit ] At this stage, the risk of losing the investment is shrinking because the nature of any uncertainty is becoming clearer.
However, the causation of major risk becomes higher The venture capital firm could have underestimated the risk involved, or the product and the purpose of the product could have changed during development.
This is the first encounter with the rest of the market, the competitors. The venture is trying to squeeze between the rest and it tries to get some market share from the competitors.
This is one of the main goals at this stage. Another important point is the cost.The 18th annual New York Venture Summit, presented by youngStartup Ventures, is the premier industry gathering connecting venture capitalists, corporate VCs, angel investors, technology transfer professionals, senior executives of venture backed, emerging and early stage companies, university researchers, incubators and premier service providers.
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The 18th annual New York Venture Summit, presented by youngStartup Ventures, is the premier industry gathering connecting venture capitalists, corporate VCs, angel investors, technology transfer professionals, senior executives of venture backed, emerging and early stage companies, university researchers, incubators and premier service providers.
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Each phase of business or project development has different capital requirements. While most companies do not seek outside financing at every stage in their growth, early-stage financing, expansion financing, and acquisition/buyout financing exist for all stages.