Page 190 - Winning The Credit Game Bundle (CK Patrick)

Because angel investors and venture capital funds often seek
similar things in the businesses they invest in, we will combine
their requirements into a single section for the purposes of this
book.
A venture capitalist’s hope is that the company they invest in
grows to become very large, and their investment’s value will
thus be multiplied. Imagine, for example, being one of the first
investors in Apple. As a venture capitalist investing in Apple,
you could have purchased a large number of Apple shares for a
fraction of the current share price. You could have ended up
owning a large chunk of the company for what would be a tiny
investment compared to Apple’s worth today.
Because venture capitalists choose businesses that are newer
and less proven, they will want rigorous information about your
company’s past growth and plans for the future to convince
them that you have the potential to grow by orders of magnitude
in the years to come. Only then will they give you a large infu-
sion of cash in exchange for partial ownership of your company.
Venture capital funds will also often serve as “fund
managers,” signaling to other investors that they believe in this
company and inviting other investors to invest. They often
charge an annual fee for managing the company’s investment
fund for a period of 7 to 10 years, during which they hope the
company will establish rapid growth.
Because they will then have invested a great deal of their
own money into your company’s success, venture capitalists will
also have an interest in providing guidance to optimize your
company’s chances of massive growth.
This may be very desired if you are a financially motivated
business owner who wants your company to become as big as
possible. On the other hand, it may be very undesired if you are
a craft-driven business owner who wants to ensure that certain
business practices or quality standards are adhered to, even if
these may not be compatible with rapid growth into a large
corporation.
This is why it’s a good idea to carefully consider what your

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