When an investor offers a business in Colorado venture capital, the owners need to think carefully about the advantages and disadvantages of making a deal before proceeding. According to one industry expert, about 40 to 50% of venture capital investments don’t succeed, and a vast majority of profit only comes from 10 to 20% of investments that pay back big returns. For the business thinking about accepting this type of capital, carefully considering the chance that things might fail is important.
Typically, a venture capitalist will ask themselves a few questions when deciding whether to invest in a company. They will evaluate whether a business is large enough to be sustainable over time. They will consider whether the people operating the company are capable of substantial growth. Finally, they will take a close look at the founder and figure out if they have that special quality required to succeed in a competitive market.
For the business deciding whether to accept venture capital, there are financial and governance factors to think about. Of course, each party is interested in what share of profits they’ll get. These terms need to be established clearly. What fewer business owners think about up front is how much control the venture capitalist will have over their business once an investment is made. Disagreements about company management and direction can lead to big problems.
Companies considering accepting venture capital can benefit from the support and guidance of an attorney or firm with a focus in business law. Contracts between inventors and companies can be very complicated, and it’s the responsibility of lawyers to clearly explain the terms and advocate in their client’s interests. A law firm may also help companies arrange deals when they have difficulty securing a traditional source of funding.
