Alternatives To Venture Capital Funding
The stringent requirements laid by venture funding capitalists, compel many entrepreneurs to look for the initial funding from angel investors, or other alternatives to venture capital funding. On this page, you will get info relating to other options to venture capital funding.
Most of the time, many venture capital firms in a start-up, unfamiliar to them will seriously assess an investment only if the company can demonstrate at least some of its declarations about the potential of the technology in the market and its services. To even be able to reach to this level, many start-ups look for self-finance, seeking venture capital funding alternatives. This practice is known as “bootstrapping". These angel investors may be more willing to invest in highly tentative prospects, or may be known to the entrepreneur.
For some time now, a debate has been brewing up on the "funding gap" that has grown between the friends and family investments, which is generally in the $0 to $250,000 range. The amounts most Venture Capital Funds prefer are investing between $1 to $2M.
This 'gap' is often filled by angel investors and equity investment companies as alternatives to venture capital funding. The startups range from $250,000 to $1M.
Another of the options to venture capital funding is crowd funding, which is fast gaining popularity. The capital required for a new project or enterprise is raised by requesting to large numbers of ordinary people for small contributions. This venture capital funding alternative is getting renewed attention from entrepreneurs. Social media and online communities have made it possible for reaching out to a group of potentially interested supporters at very low cost
In the case of industries where it’s easy to evaluate the assets and securitize them effectively, they are able to raise debt to finance their development much easily. The reason is that they form a reliable source for generating future revenue streams or at least have a good prospective for resale in case of foreclosure. Manufacturing or mining industries are some good examples.
Along with these traditional venture capital and angel networks, some other alternatives to venture capital funding have surfaced which not only allow groups of small entrepreneurs to compete in a privatized business plan competition. Here the group itself serves as the investor through a democratic process.
We hope the discussion on some of the main alternatives to venture capital funding on this page has been useful to you.