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Starting Your Own Business? Venture Capital Questions – To VC or Not VC?

Starting Your Own Business? Venture Capital Questions – To VC or Not VC?
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Of course, absolutely nothing to do with Shakespeare, but an old question nevertheless. If you are setting up a whole new business or expanding your existing one, in case you partner by having an investor/VC? If you do what when you expect? The choice depends upon your ambition along with the success is determined by your companion of preference.

From an investor’s viewpoint, the next 4-5 years represent a great recruitment market window. The market is far from buoyant however the sentiment is while on an upwards curve. Like buying a house, no-one wants to buy at the peak of the market or the bottom of a lifeless trough. But catch the market because it is rumbling into life and you’re simply on to success. If it’s good timing for investors to get back in growth mode it’s an ideal time for companies.


Are you ambitious? Of course, you might be. You are in recruitment and successful enough to contemplate starting a small business or are running one already. But ambition means different things to several people. One end with the scale, “A”, could be to manage a ‘lifestyle’ business using a promising small to the mid-sized team and just economic independence. At the other end, “Z”, it would be to grow a business to IPO. Where you’re for this scale dictates do the following.

Let’s be clear if you’re nearer “Z” than “A” on the ambition scale and you choose the best investor the chances of you creating genuine wealth FAR outweigh going it alone. It’s not just the money but the decisions you create all across the journey if you know you’ve got backing. It’s fully checking out plans versus trying things out cautiously. It’s structuring the business for fulfillment from the outset versus discovering down the way that you’ve got made mistakes. It’s tax efficiencies that double your dollars, literally, versus getting caught out. Would you like a large piece of your small pie or even a smaller piece of a large pie?

Investors are trying to find ‘scalability’ for their investment to feel exciting. It is not just a clear case of making profits but of opportunity cost. To some extent investors have a collection of where you can invest their funds therefore the greater the potential returns, the harder attractive, influenced by their measure of risk.

However, statistics indicate that to cultivate aggressively and/or after dark average recruitment company height and width of 5 to 15 consultants inside a 3-5 year window requires funding. Bank funding is virtually impossible to find in the present climate which leaves investors since the only option unless you’ve just won the Euro Lottery! If that funding could be joined with specialist recruitment knowledge that one could draw on, in that case, your probability of success multiplies.

Once you contemplate external funding, the large questions are:

How much equity will you sell (or split in a very start-up)?

For a pre-existing business using a track record, this can be simpler to calculate if challenging to agree! For a start-up, in the greater part of cases, there is no real value or valuation that may be accomplished. It will come down to what you might be bringing towards the table, in addition to a business plan. Are you putting money in? Might you have guaranteed revenues? Are you going for a salary cut, at least in the early stages? The more you bring, the more you will get. If you bring less you need to still need the ability to enhance your ‘share’ by delivering on your strategic business plans. Your success needs to be well rewarded. Having a truly happy and motivated business owner is sensible for those involved parties.

How much control will you have?

You started your business when you wanted to be in charge. You were fed up by having an employer dictating the pace. You don’t want to end up in the relationship that is like an employee/employer, a minimum of steer clear you as the employee! This should ‘t be the case and if it feels as though it’s going to be as soon as the contract is signed, then get out. However, expect controls to become applied to protect the investor’s money. How that cash is spent, how rapid, and by whom will require regulations and rules. That’s normal. What would you do had you been investing your dollars?

What form of the investor will probably be most effective for you?

The initial response is easy. It’s the same because of the question of “which investors when you approach to obtain investment?” One that invests in and understands your market. It doesn’t have to be your narrow niche but it has to be recruitment and preferably as close for your requirements market as you possibly can i.e. temp vs perm, search vs contingency, blue-collar vs specialist.

The better the investor understands your market the less potential for confusion and misunderstanding and the quicker the grasp of one’s approach and nuances. Very importantly, they will be capable to add value to your strategy, decision making, company structure, and eventual exit plans.

It’s a lot of fun to strike out on your own or grow what you’ve over the next 3-5 years. Decide what outcome you would like and judge wisely. To VC you aren’t VC, that is certain than the question.