Pros and Cons of Taking Venture Capital

The majority of startups never get to the point where taking venture capital is even an option. This is because they either fail outright or they simply never build the type of company profile that fills venture capital investors’ imaginations.

venture capital

The Pros

Receive a Major Infusion of Capital

One the most obvious benefits for taking venture capital is receiving a major infusion of capital. Clearly, more money that venture capital firms are able to provide gives startups the ability to simply continue existing while paying salaries, vendors, bills, and creditors.

Motivated to Introduce You to New Markets and Investors

The ability to create new connections and opportunities from the venture capital financing is of incalculable value for companies. These new connections will literally be invested in your success, as their fortunes are now tied up with yours. These new venture capital investors will be motivated to use their connections and leverage to get your company into new markets and potentially in front of other investors.

Receive “Free” Advice and Direction

Your new venture capital partners will likely be motivated to provide you with all of the unrestricted business advice you can handle. It would be very beneficial to utilize these venture capitals’ connections to help steer you and your company into profitability and success.

The Cons

Major Dilution

Bringing in venture capital investors not only means more minds to bounce ideas off of, but also more owners you must accommodate and keep abreast of company information. So, whereas before you were making all the decisions, now you have investors with which you must consult.

Have Someone to Answer To

Similar to the above point, bringing in outside venture capital investors can cause major changes in the way your business is run. The business is no longer solely yours. You share it with others. This shift in power structure can affect all aspects of business, from the way your products are developed and marketed to who you can and can’t hire.

Pressure to Exit

Unfortunately, because you must now consider your venture capital investors in your decision making, these partners may find that they’re not so excited about what you’re bringing to the table anymore. This might then cause venture capital partners to consider seeing the company’s future without you in it.

Need legal assistance for your new business in the San Diego area?

At Lee, Shome & Kennedy, LLP, in San Diego your solution starts here.

CONTACT US

Leave a Reply

Your email address will not be published. Required fields are marked *