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Securing 2nd and 3rd-Round Venture Capital |
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 Widget sales are booming – the competition is scrambling, demand is
up, and the books are finally treading water.
Your core management team
has big ideas for the future of Widget Inc. Opportunity is abundant;
but how will you fund that next big leap?
As your start-up
matures, obtaining second- or even third-round funding may allow your
business to expand and grow into new opportunities identified after
your business was established. If your product or service has proven
itself in the marketplace, you may be a candidate for an additional
round of funding.
Some possible uses of post start-up funding include:
* Penetration of new markets, either by industry or geographic location
* Development of new products or services that compliment your key lines of business
* Acquisition of competitors, staff and/or facility expansion, or new equipment
Damage Control
If your company is struggling to make ends meet, post start-up financing is not an effective way to address red ink.
Consider
other methods of debt management such as refinancing, streamlining
systems of production, and bootstrapping before looking for additional
funding. Investors will not be interested in extending additional funds
to companies that have not yet established themselves firmly in the
marketplace.
Identifying Post Start-Up Funding Sources
The
best source for post start-up funding may be your original investment
partner. However, sometimes asking your investor-partner for additional
funds can be a lot like asking your parents for a raise in your
allowance. You’re going to have to really prove a need for it, and even
then, your original funding source may have woke up on the wrong side
of the financial plan.
Should this prove to be the case, there are additional sources to consider, including:
* Lending institutions (banks)
* Venture capital firms
* New private investors
* Other professional service providers within your core management team
If
you developed a list of potential investment partners prior to
start-up, renew your contact with these individuals. By telephone or
letter, convey the success your product or service has experienced, as
well as your purpose for the post start-up funding. With a solid track
record in hand, you may be surprised to find how many potential
second-round investment partners you have.
In addition, you’ll be
in a stronger position during the negotiation process, meaning you
won’t have to give up as much control to achieve your desired result.
Tips For Maximizing Post Start-Up Funding
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Don’t commingle funds. Avoid falling into the trap of using new funds
to level the books. If you obtained additional funding for expansion,
do not deviate from the plan. Address any cash flow problems or
existing debt service independently from your company’s expansion needs.
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Learn from past mistakes. Undoubtedly, your company’s start-up phase
was a learning experience unlike any other. Recall the lessons learned
from handling your initial start-up capital. Now that you’ve
established a strong working relationship, call in your management team
to gather additional opinions on the best way to disburse funds on each
project.
* Look for new opportunities along the way. As you
implement your expansion plan, be on the lookout for ways to streamline
and maximize the results of your efforts. Don’t be afraid to upgrade
your plan; remember that your business plan should be a “living”
document, able to flex as the status of your market and the general
economy change.
 Jim D. Ray
Jim is a seasoned entrepreneur and
president of Web Presence, a national web design firm exclusively
serving the small business market sector. To learn more, or for a free
quote for your own web site, visit the Web Presence web site at: www.web-presence.net
Article Source: www.EzineArticles.com
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