Securing venture capital (VC) allows startups to be able to grow and thrive, giving them the means to scale operations, develop new products and even expand into new markets.

In addition to financial assistance, VC can also contribute valuable expertise to companies, especially young startups, with experienced industry leaders providing strategic guidance and access to valuable networks that can help propel companies to new heights.

Securing venture capital isn’t the only way for burgeoning young businesses to develop and flourish. It certainly is seen by many as the best and most effective way to achieve rapid market penetration as opposed to a slower, more organic growth strategy. However, it does involve giving up equity and sometimes, control too.

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Who Needs Venture Capital?

While the importance and value of securing venture capital cannot be understated, it’s a lot easier said than done. The process is time-consuming and complex, and trends show that venture capitalists are becoming increasingly selective.

So, it’s essential to start off by questioning whether or not your business needs venture capital and is at the right point in its journey to properly benefit from a large injection of capital investment. Of course, VC isn’t available for free – it requires relinquishing equity and control over your company that would be avoided if you were to stick to bootstrapping.

Thus, deciding whether or not your company should pursue the VC route with regard to funding opportunities is no small question, but if you do, the next thing you’ll need to consider is the difficulties you’re likely to face in the process.

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The Difficulties Involved in Raising VC

It’s essential to understand at the outset that while securing VC isn’t, by any means, impossible, it is incredibly difficult. It requires a great deal of time and effort, and there are many things that potential VCs look out for in startups they’re considering investing in.

Some of the most significant challenges involved in attracting and securing venture capital include the fact that it’s:

• Time Consuming: The process of securing VC is incredibly lengthy from start to finish, involving massive amounts of research, prospecting, pitching, answering questions, negotiations and more. It’s normally a lot of back and forth with potential investors, often (more often than not, unfortunately), you won’t end up receiving investment.

• Expensive: There’s no getting around the fact that VCs play hardball. Not only are you going to spend loads of time drawing them in and convincing them to invest in your company, but you’re also going to pay for it. That is, in terms of rates of equity and more. That’s why it’s incredibly important that you’re diligent about writing and evaluating equity term sheets before finalising anything.

• Results in Loss of Control: The ultimate goal of investors is to secure the highest rate of return possible, and one way they do that is by means of equity. The more equity you hand over, the more control they’ll have over your business. While this shouldn’t necessarily be a deal breaker, it’s something you really need to consider in terms of how much control you’re willing to handover in exchange for investment.

• Requires Exit Strategies: Often, what is a dealbreaker for VCs is exit strategies and your long-term plan for the business. Some VCs may be vying for early exit while others may prefer later-stage exit, and it’s possible that their preference may conflict with your plans. If so, it may be difficult to secure investment while you’re not on the same page.

However, just because the process is difficult doesn’t mean that it’s not worth the effort and that there aren’t ways you can improve your chances of attracting and securing venture capital.

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What Are Experts Saying?

According to experts, strategies for attracting and securing venture capital very much depend on the specific business in question, but most of all, it’s about focusing on the appropriate VCs and being able to properly and clearly communicate what your business has to offer.

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