Venture Capital Firms Encourage HR Outsourcing to a Professional Employer Organization

Is your Start-up Company attractive to Venture Capital Funding?

So your fledgling company is ready to grow. You have a great product, strong sales growth and a business plan to dominate your market. The only thing you need now is funding to make it happen. So you may be considering venture capital to fund your expansion. If you have made the decision to consider funding from a VC firm, and you want their investment, then you must understand the criteria they will use to make their decision about whether to invest in your company. Volumes have been written about this subject of getting noticed by VC firms and how to get funding, but there is one aspect you may not have considered: Demonstrating your focus. Pretend you are the Venture Capital Analyst

Just for a moment, pretend you are the person reviewing a start up company and are considering making an investment in the company with your own money. What criteria will be most important in that decision? There is a long list that we will not review here, but certainly one of the criteria will be: Am I confident that the start up will use my funds to grow the company quickly and not burn it up with the distractions of implementing an administrative bureaucracy and meeting regulatory compliance. As a venture capitalist you want the management team to demonstrate single minded focus on product, service and growth.

Why Venture Capital Firms like PEOs

So how can you demonstrate to VC funds that your focus will not be distracted by the administrative tasks of running your start up company? Hire a Professional Employer Organization (PEO). A PEO will handle payroll, workers’ compensation insurance, health insurance, supplemental insurance and a myriad of regulatory obligations associated with being an employer. Outsourcing these tasks to a PEO demonstrates that your company is focused in the right place, and your management team will not be distracted from your company mission. In addition hiring a PEO can provide instant access to a suite of employer benefits that make your start up company a great place to work…. important for encouraging people to join your team. According to our contacts, General Atlantic Partners (one of the largest VC firms) has roughly one quarter of their investment portfolio using a PEO. This statistic demonstrates why entrepreneurs should take a look at hiring a PEO.

Finding the right PEO

With over 700 PEOs operating in the USA, finding the best fit PEO at the best price can be a challenge. When searching for viable PEOs for your company, it is important to start by taking a complete review of your operational requirements. Think about the kinds of services and benefits that are important for your company. Next compile a list of the PEOs that are licensed in your state. From that list you need to create a checklist that matches each of your requirements …


The past couple of years have been tough for modest organizations, to become positive. With the economic downturn, sales have been slower and growth has been halted in a lot of industries. Additional, the credit crisis of 2007-2008 has created financing a organization even harder. Fortunately, the years ahead look promising for little company financing. Beneath are the top methods to secure financing for a smaller business enterprise:

Angel Investing & Venture Capital

Angel Investing is the process whereby a wealthy individual provides funding to a company in exchange for equity and sometimes debt as well. There are professional Angel Investors, or the could simply be an acquaintance of the entrepreneur. Venture Capital is largely the same process, but on a larger and more sophisticated scale. Usually, venture capital firms create “funds” from investors that they use to invest in young companies or startups. While Silicon Valley is notorious for getting the lion’s share of venture capital, there are also numerous VC firms and individual Angel Investors that work in industries other than technology and are based outside of Silicon Valley. To get a new and unproven organization, it’s virtually impossible to secure bank financing (see under) and venture capital or angel investing will be the idea choice for a young startup.

Bank LoansAs mentioned, bank lending was been tough on organizations during the credit crisis, and it’s still very difficult to find easy credit available in the financial markets. However, for companies in strong financial positions, with plenty of assets, lending is starting to gain momentum once again. The Tiny Business enterprise Administration, see beneath, can make a major impact in the availability of credit for little businesses.

SBA Loan ProgramsThe Smaller Enterprise Administration doesn’t directly make loans, but they guarantee bank loans for qualifying enterprises. This has a number of benefits. The added security to the lender makes the terms and interest rates much more favorable for the organization. In 2012 and beyond, SBA Loan Programs should see strong activity.

These would be the primary formats of securing financing for a small business enterprise, but there are numerous others (including combinations of the above), and all available options should be considered by the organization or entrepreneur before making a final decision on how to finance the business. Typically the most beneficial financing choices are as follows: Angel investing (for any brand new idea), venture capital (to get a growing startup), SBA loans (for young but thriving firms) and traditional bank loans (for the mature and growing company).…