The Stages of Venture Capital Financing

With a career that has seen him start and grow a number of businesses, John McKowen is a venture capitalist based in Colorado. He has almost two decades of experience in providing funding to startups and seeing them through the financing process. John McKowen has worked with internet developers as well as oil and gas developers in the venture capital space.

By definition, venture capital is money given to a startup company by a private investor or institution. This type of investment normally comes with a lot of risks, but also a lot of potential rewards.

When an entrepreneur wants to approach an investor for venture capital, they must be prepared. It starts with ensuring the business proposal is thorough and complete, and that there is a well-written executive summary. Once a plan is submitted and an investor is intrigued, a meeting typically takes place to introduce everyone. The investor then performs due diligence to ensure that the business plan is factual.

Venture capital financing can fall under any of three stages. Early-stage financing consists of financing overall business ideas, startup manufacturing, and extra startup capital. These agreements may also have a second stage of expansion financing that injects more capital for growing the business. The third stage consists of acquisition or buyout financing. As the investor starts to own a larger part of the business, it is normal practice for them to try and acquire the entire operation from the founder.