Almost every business venture needs capital to start up with. The business owner must raise capital for the business by finding sources willing to lend money for such a venture. Normally, such funds are gained by floating a company so that investors can buy shares in it. However not all companies are floated; some remain unlisted and so cannot get money from public shares.
In such cases certain investors make money available for these businesses and this is called Venture Capital. It is loaned on a risk-sharing basis that is, the lender takes the risk that the venture may not become profitable. The loan is unsecured, although the lender may reserve the right to be on the board and hold unlisted shares sold to them by the private shareholders in the business.
The venture capital investor should also take an advisory position, helping the business to become successful by his expertise, knowledge and experience. This is quite different from the normal lender such as banks that have no further interest in the business except to require timely repayments of the mortgage plus interest.
Capital raising for such equity financing is not necessarily easier than any other means of raising money. You still need to have an excellent business plan to show, know exactly how much money you need and what you will be using it for and you also need to carefully match your venture capital sources to your own requirements.
Expert financial analysis, and identification of all relevant business issues, a business plan and information memorandum should be prepared by professional experts to ensure success in finding venture capital.
If you intend to draw up your own business plan you will need to walk a fine line between having enough information and too much detail. The main purpose of the plan is to spark interest rather than inform about every little detail.
Venture Capitalist is a professional investors and has been successfully funding small start-ups for the last 10 years now.