Every year, venture capital and private equity firms go out in search of ambitious startups to invest in and help grow into solid businesses. David M. Daggett, an experienced accounting professional, who once served as the chief financial officer of a $250 million venture fund, knows all too well how private investment is helping shape the future of entrepreneurship. As a native of California, he’s also seen the impact venture capitalists have had in Silicon Valley and the plethora of game-changing ideas that have seen the light of day as a result.
Private investment by venture capitalists, angel investors, and private equity firms are medium to long term, often with the requirement that these investors get an equity stake in the business. Some private investors just want a stake in the business; others will want to take a more visible role in operations/management. Still, the underlying factor is that the business has to display growth potential and have solid management.
As an entrepreneur, you have to know what private investors are looking for. Getting a venture capital to finance your business idea is very different than approaching a lending institution for a loan. These institutions will charge interest on the loan, whether the business is successful or not. For private investors, a return on investment is their main goal.
With private investors, a business has to possess the potential to grow within five years for it to make business sense. Lack of such potential is likely to discourage them.
David M Daggett CPA is an experienced Certified Public Accountant with extensive knowledge on venture capital and entrepreneurship.