Venture Capital Funding

Another post by Dad….

Speaking of internet marketing and businesses, so far we’ve had the posts run by a youngster, as a lesson in business for him. But what happens when things take off business wise? Then it may be time for some funding.

From what I’ve gleaned in speaking with people who’ve dealt with venture capital, there’s a couple of different scenarios.

First scenario, are internet business. I believe many of these have a rock star approach - they want to be the one in a million that makes it. Unfortunately most of them don’t make it, the days of huge money for nothing but an unproven idea are mostly dried up. Venture capital for these tech startups has dried up substantially. And i think that’s for the best - tighten up on the tech bubble syndrome. However there are still some opportunities for cash floating around in the tech arena. My understanding is that some of these tech companies are flush with cash and looking to buy up other sites with traffic. If you’re big enough and diversified enough online (and have the cash) substantial opportunites may be available that wouldn’t be available to the individual site owner. For example, say a big tech company has a huge automotive site. By buying an online insurance agency they can not only monetize the online insurance agency aspect of the site they bought, they can further drive more car insurance leads through to the insurance site from their main car site. So there’s synergy opportunites there; that’s the market that I’ve seen as still being available out there.

The second opportunity is the more traditional angel/venture capitalist type of structure. Businesses may be looking to grow, but not have the cash to grow. Selling off their souls to venture capitalists can be a way to get those costs. A few problems arise however. First, the venture capitalists are looking not to grow your business. They’re looking to maximize their income. So what they’re looking to do in many cases is flog your company hard enough and fast enough, then take it public to get the fattest and fastest return. As a business owner, that may not be what you want - but if you’ve taken on investors it may be what you get, and no choice in the matter. The next issue with this more standard approach is that the investors typically aren’t looking for ‘good ideas’. They’re looking for proven money performers. What that means is that, as much as watching the Dragon’s Den might be exciting, the reality seems to be that you’re only going to get investor money once you’re already making money. If you’re not already making substantial money - and proven that you can do so - then you’re apparently unlikely to get any investors to cough up the money.