trying to understand when is the right time to seek venture capital; before our soft launch or after establishing more strategic alliances. our before our soft launch is seeking an angle investor a better strategy to help with company expenses and getting the business off the ground?

-- dave moen (davemoen@mac.com), October 25, 2000

Answers

One thing that I have heard people say more often than not is not to grab venture capital money when it was available and not taking enough of it when it was available.

When you think VC think blood, because VC capital is going to be the blood of your business until the profits start coming in and you can safely separate yourself from the supply line.

It comes down to scale, a venture capitalist isn't going to be interested in a small bite, each financing round for a VC is a major undertaking that requires them to form strategic alliances as well. The fact that you are looking at an angel investor tells me that your financing needs are minimal at this point.

A business gets off the ground with one primary thing, cashflow. If you have done your cashflow projections that will tell you how much financing you need and whether the scale of the financing will interest a VC. People tend to use angel investors when they need smaller outlays of capital.

The most important decision regarding capital is how much will you able to control your business. Do you have a profit or exit strategy? Do you have a business plan that makes sense to a VC and to yourself? The right time to seek venture capital is when you think you need significant blood supply. At the end of the day, focus more on what it means for your business to survive rather than taking it one day at a time and losing sight of your cash flow requirements. Remember more potentially profitable and profitable businesses are killed by poor cashflow management than by any other single thing.

Seek a lot of advice, people are willing to help you if you have applied a great deal of thought to constructing a serious business plan.

-- Mark Zorro (zorromark@consultant.com), October 25, 2000.