Starting Business : Getting started to raising money
Most books, and articles about starting a business, and also most people’s concepts about starting a business, pertain to the venture-capital model. In that model, you identify an opportunity in a large and growing market, hire a complete team of experienced and successful managers, raise a lot of money, and spend it to accelerate your business development. Just by reading this simple description, you can see that it’s most appropriate to raise
getting investor - raising money
Venture capital when you’ve already begun to operate and you need an infusion of capital to drive the business. Venture capitalists serve a very useful purpose under those circumstances. Reputable venture-capital investors generally don’t provide seed money to brand-new companies. These investors tend to have shared opinions about what’s hot; that is, which fields are candidates for investments at any given moment. For sure, the optics industry hasn’t been hot for a long time, not since the mid-1970’s. Very few laser and optics companies have been successfill in getting venture funding.
Once venture-capital investors commit funds, they need an objective measure of whether the company is on track; thus, managers have to be concerned about meeting the milestones on the business plan. This management approach can be costly for a small company; it can lead you to spend money before the business really requires it, in order to complete tasks that look less important now than they did when you wrote the plan.
Consider this, too. Venture-backed businesses have high failure rates — perhaps only about 10% of them become big successes. This failure rate is partially due to the fact that the winners have to compensate for the losses sustained by the other 90%. For that reason, venture capitalists tend to have high expectations for the return on their investment, typically 50% per year. The only way they can get that type of return is to take a high percentage of your business for their investment, especially when you approach them too early in your development. In that sense, venture capital is expensive. Another problem is that venture capitalists generally assume engineers can’t
manage this kind of business. Also, when venture capitalists are disappointed, they are quite willing to “pull the plug.”
