Venture capital is a viable form of funding, particularly for companies in high-growth spaces such as technology, energy and biotech. And for some companies, recruiting venture capital makes sense.
But the funding method is not right for everyone. Although there are countless VC firms looking to invest money in up-and-coming companies, that doesn’t mean you should pursue VC funding at all costs.
How can you determine if VC funding is right for your company? You must first develop a crystal-clear picture of your company, where you want to take it and the circumstances that surround it, and do so before seeking any funding.
“The most essential thing to understand is what type of capital you should be seeking,” says Jennifer Hill, who was a venture capital attorney before co-founding foreign language vocabulary tool Sixty Vocab. “Are you in a high-growth space? Are you willing to sell off part of your company in exchange for venture capital? Can you get funding from other sources? You should be able to answer all of those questions before you go after venture capital.”
Some venture capital firms fund startups, some fund smaller companies that are past the startup phase, and some only play with the big kids, funding later-stage companies worth $30 million or more.
In any case, finding venture capital funding can be difficult, with lots of dead ends staring you in the face before you find the right match. It can be a lucrative path for companies positioned properly but a frustrating and fruitless road for companies that would have been better off taking another route. Determining which category defines your company can have a profound effect on its long-term health and survival.