Although the concept of venture capital has been around for well over 200 years, it’s only really in the last 20 or 30 that venture capital as we know it has taken off.
Many venture capital companies trading today were initiated in the 80s or 90s.
Although this idea has proven popular and successful for both investors and for those struggling to take their business to the next level, there is widespread concern among new and would-be entrepreneurs that the bleak economic outlook is liable to put off investors. The concern is that venture capital investors will be less interested in the high-risk businesses they hitherto embraced.
Despite, or even perhaps because of, the global economic turmoil, markets and opportunities are emerging that are there for the taking and investors are still keen on viable opportunities
Unfounded
Many argue that for this reason it’s unadvisable to start ventures because obtaining financial backing is likely to be almost impossible, stalling the company and preventing you from taking advantage of markets you perceive to be available.
These concerns are certainly understandable, but in fact they’re quite unfounded. Despite, or even perhaps because of, the global economic turmoil, markets and opportunities are emerging that are there for the taking, and investors are still keen on viable opportunities.
To secure an investment, either from a venture capital firm, private investor or business angel, or even a venture capital trust, your business must present itself in a clear, unambiguous way as highly likely to succeed. This has clearly always been the case, but today it’s of critical importance to not rush in with the first business idea you have, but to take time devising a business plan, including thorough research of the market, so you can clearly demonstrate the potential for growth and success.
If you can do this within the current financial situation, then you will almost certainly find yourself gaining interest quicker than ever before.
Right now is perhaps the best time of all to show optimism and determination to succeed. The number of investors hasn't decreased, but the number of businesses has, and growth in many has been slower than expected.
With a good business plan, even a modest one, most entrepreneurs should receive more attention than they would have only a couple of years ago before the markets crashed.
Be prepared
However, it’s important not to confuse attention with investment.
It might be easier than before to draw attention, but if you’ve failed to carry out your research and have only a sketchy business model, then expect to see potential investors walking away very quickly. It’s more important than ever to do your homework and be fully prepared.
But this shouldn't be seen as bad news at all. It's always been important to be prepared, and the current climate only highlights this need.
Another aspect of venture capital often forgotten is that money isn’t everything – it’s also about getting people with the right experience, knowledge and contacts involved with your business. You shouldn’t focus entirely on the level of investment.
Getting the right investment from a company or private investor, who will then be represented on the board, can mean the difference between surviving and succeeding. Don't just take a bundle of notes from the first investor to come along.
The investments are there for the taking, so don't assume that just because there’s a recession on that you should leap at the first investment option you get. Venture capital is a two-way street, and if you forget that, you could get run over before you've even started.
