Venture Capital

Venture Capital

The remarkable growth of the Internet as a global commerce and information sharing resource has created the most dynamic and expansive environment for new business development in this century. Unlike the internet based companies in 1980s, the cost to start up a social media company is extremely high. A good way to gather the initial investment is seeking help from the venture capital firms. Someone may argue that venture capital firms may take too much control of the company and the funder may ta a risk of losing the leadership of the whole company once the venture capital companies entered. The fund has a responsibility to the investor to use the fund’s money where the fund management believes it has the best chance of striking gold or having an enormous return on investment. Therefore the usage of the money from VC is always limited to the founders. We, as the funders of the company may face the challenge that people form VC may come into our office and attend the meeting. We can not 100% trust them and there are many situations that these consultants may hold different opinions than us, which could cause huge dispute on some strategic business plan. However, like other sources of equity financing, venture capital offers both advantages and disadvantages. The main advantage is that the business is not obligated to repay the money. For a start-up company, this cash flow can some time play significant role in speeding up growth. The involvement of high-profile investors may also help increase the credibility of a new business.

Even if we have the willingness to acquire the first investment from outsiders, venture capital is scarce and often difficult to obtain. Venture capitalists tend to be highly selective in choosing investments. Some will only consider investments in specific technologies, industries, or geographic areas. In fact, the larger venture capital firms typically reject more than 90 percent of the requests for funding that they receive. They evaluate the remaining requests thoroughly, and at considerable expense, before selecting a few that closely match the investors' areas of expertise and offer the best earnings potential. Therefore, in order to select the most qualified VC, we did some research on the VCs in IT field.

IMPAC

Impact Venture Partners is an early stage venture capital firm. It is leading venture capital in the industry of Web-to-phone system development. The company is based in Austin, Taxes.

ARCH

Arch is a company co-founded with leading scientists and entrepreneurs, concentrating on bringing to market innovations in life sciences, physical sciences, and information technology.

Draper Fisher Jurvetson

DFJ is a very famous VC in IT field. It has funded well-known technology companies including Baidu(Chinese Google), Hotmail (acquired by Microsoft), Overture (acquired by Yahoo), Skype (acquired by eBay) and Glam Media. Other notable investments include Tesla Motors, SugarCRM, Technorati, Interwoven, Meebo and SolarCity among others.

There are many other venture capitals that we can choose from. But we should set our selection criteria as such: First, it has to be a famous company with great reputation in the related field, because such VC will help us build up a good creditability within the market within a short period of time. Second, the VC must has previous experience on working with startup company in similar subjective. And third, the company has to be in the market for a long time and kept a good performance on revenue for a certain period of time.

Selecting a best matched VC is vital important to the survival of our company. Good venture capital will send consultants who are familiar with market or technology can we can talk to each other in the same table. More importantly, if the VC’s business plan can be aligned with the funders, then the deal can be acceptable, otherwise there will be substantial disputes in the future negotiation and corporation process.