Securing Second and Third-round Venture Capital Financing

Home
>
Entrepreneur
>
Securing Second and Third-round Venture Capital Financing

Securing Second and Third-round Venture Capital Financing

Widget sales are booming ? the competition is scrambling, demand is up, and the books are finally treading water. Your core management team has big ideas for the future of Widget Inc. Opportunity is abundant; but how will you fund that next big leap?

As your start-up matures, obtaining second- or even third-round funding may allow your business to expand and grow into new opportunities identified after your business was established. If your product or service has proven itself in the marketplace, you may be a candidate for an additional round of funding.

Some possible uses of post start-up funding include:

* Penetration of new markets, either by industry or geographic location

* Development of new products or services that compliment your key lines of business

* Acquisition of competitors, staff and/or facility expansion, or new equipment

Damage Control

If your company is struggling to make ends meet, post start-up financing is not an effective way to address red ink.

Consider other methods of debt management such as refinancing, streamlining systems of production, and bootstrapping before looking for additional funding. Investors will not be interested in extending additional funds to companies that have not yet established themselves firmly in the marketplace.

Identifying Post Start-Up Funding Sources

The best source for post start-up funding may be your original investment partner. However, sometimes asking your investor-partner for additional funds can be a lot like asking your parents for a raise in your allowance. You're going to have to really prove a need for it, and even then, your original funding source may have woke up on the wrong side of the financial plan.

Should this prove to be the case, there are additional sources to consider, including:

* Lending institutions (banks)

* Venture capital firms

* New private investors

* Other professional service providers within your core management team

If you developed a list of potential investment partners prior to start-up, renew your contact with these individuals. By telephone or letter, convey the success your product or service has experienced, as well as your purpose for the post start-up funding. With a solid track record in hand, you may be surprised to find how many potential second-round investment partners you have.

In addition, you'll be in a stronger position during the negotiation process, meaning you won't have to give up as much control to achieve your desired result.

Tips For Maximizing Post Start-Up Funding

* Don't commingle funds. Avoid falling into the trap of using new funds to level the books. If you obtained additional funding for expansion, do not deviate from the plan. Address any cash flow problems or existing debt service independently from your company's expansion needs.

* Learn from past mistakes. Undoubtedly, your company's start-up phase was a learning experience unlike any other. Recall the lessons learned from handling your initial start-up capital. Now that you've established a strong working relationship, call in your management team to gather additional opinions on the best way to disburse funds on each project.

* Look for new opportunities along the way. As you implement your expansion plan, be on the lookout for ways to streamline and maximize the results of your efforts. Don't be afraid to upgrade your plan; remember that your business plan should be a "living" document, able to flex as the status of your market and the general economy change.

Jim D. Ray is a seasoned entrepreneur and president of Web Presence, a national web design firm exclusively serving the small business market sector. To learn more, or for a free quote for your own web site, visit the Web Presence web site at: http://www.web-presence.net

In The News:

Shades of grey
The Economist
THE SMALL-BUSINESS association of Wenzhou, a city in Zhejiang province renowned for its scrappy entrepreneurialism, used to inhabit spartan premises in the city centre, but in March it graduated to plusher offices 15 floors up on the fringes of the ...

Win tickets to arts and tech festival NXNE in Toronto
New Scientist (blog)
As you might expect of the festival that is a spin-off of Texas's famous SXSW festival, NXNE (North By Northeast) is awash with hip music and films, as well as talks on the intersection of creativity, technology and entrepreneurialism.

and more »

Leaders explore help for entrepreneurialism
Bastrop Daily Enterprise
Winrock International Managing Director Annett Pagan, left, met with local and surrounding town officials to discuss strategic planning for economic development. Left from Pagan: City of Bastrop Mayor Betty Alford-Olive and Northeast La.

Intelius CEO Naveen Jain To Challenge The Value Of 'Experts' In Today's ...
MarketWatch (press release)
Jain is honored to share his unique vision for innovative entrepreneurialism at the US Chamber of Commerce's special annual event. Jain will join other successful entrepreneurs and leading pioneers in an exclusive live event series at 1:00 pm entitled ...

and more »

Microsoft Announces Worldwide Finalists for Imagine Cup 2012
The FINANCIAL
As the winners of regional, national and online Imagine Cup competitions, these students represent the future of technology innovation and entrepreneurialism. According to Microsoft , student teams from 75 countries have advanced to the finals with ...

and more »

Building Brand Britain
Huffington Post UK (blog)
British creativity and British entrepreneurialism are known around the world and that is something we should take enormous pride in. We've built some fantastic brands and for such a small island, we certainly punch way above our weight.

Asian Chamber of Commerce Celebrates the Spirit of Entrepreneurship at 22nd ...
The Paper Magazine
At a young age, Rippy was introduced to entrepreneurialism by her mother who founded a pharmaceutical company called ROMAT, which is now one of the leading pharmaceutical companies in Kazakhstan today. Growing up as a latch-key child, Rippy managed to ...

Communitech HYPERDRIVE Joins Global Accelerator Network as Deadline for ...
MarketWatch (press release)
"HYPERDRIVE's accelerator platform, which takes a hands-on mentoring approach, not only meets GAN's rigorous standards, but infuses a sense of edgy entrepreneurialism into the high-tech industry, bringing excitement to the group as a whole.

and more »

Microsoft Announces Worldwide Finalists for Imagine Cup 2012
MarketWatch (press release)
As the winners of regional, national and online Imagine Cup competitions, these students represent the future of technology innovation and entrepreneurialism. Student teams from 75 countries have advanced to the finals with projects that tackle ...

and more »

The predictability of politics II: Social mobility and political ...
The Malaysian Insider
MAY 2 — Remaining focused on the developments in Malaysia and the countries around us, let us go back to the topic of predictability in politics, and consider its relation to social mobility and political entrepreneurialism.

and more »

Google News