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
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 …
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
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 …