by J L Petriesan

Created on: December 04, 2008   Last Updated: July 25, 2009

Having dealt with venture capital and, on occasion, having provided the same, the best place to find venture capitalists is on the branch next to their next of kin. Yes, I mean vulture.

A venture capitalist is someone who provides money to people who need cash to start a new company and cannot provide it themselves and cannot get a bank to loan them the funds.

The reason they cannot get a bank to loan the funds is not (always) that they are bad people or that they are necessarily scam artists, but that in order to make a loan, a banker needs three things: 1) Collateral. There is usually none in a start-up. 2) A period of profitable operations, which by definition, is absent in a start up. 3) Belief in the people borrowing the money.

Now, if you have a lot of land without a mortgage and that land is not a swamp in Florida and is actually worth something, you may be able to borrow against it if you can show an ability to repay the loan out of something other than your new venture, because until you can prove by a period (long period) of profitable operation, it is unlikely you will find a bank to loan you the money.

One other definitional issue: Venture Capital is not a loan. It is capital. Equity. The capitalist will own a piece of the pie, typically a very large piece until some ridiculous (to the guy with the idea) return is obtained, at which time, the capitalist may sell all or some of the equity back to the guy with the idea.

The cheapest, but not the best, place to find venture capital is relatives. Cheapest because, they might loan you the cash for free for a period of time. Not the best because if things go wrong, as they often do, Thanksgiving could become more than a little uncomfortable.

The next place is to ask around to people you know who have their own business. Not to ask them for money, but to ask them how they got started and who helped them do it. Ask your accountant or lawyer for help.

Bug the Chamber of Commerce. Many of them have affiliate organizations which will help you get things lined up and moving, especially if it will increase employment or prove beneficial to the community.

Go talk to the banker, even if you know they are not going to do the loan. She might give you a few ideas about where to look.

You can do an internet search for the term venture capital and dozens upon dozens of these firms will show up.

In my opinion, the closer to home you are, the better. Doing business with friends of associates is probably easier than with strangers, so long as the friends and associated know, and by this I mean REALLY REALLY ( TIMES 1000) know that things can go wrong without someone being a crook. Sometimes, most often times, a dry hole is the result of bad luck, not because the money and effort was not spent. But people without a lot of experience often have trouble believing this.

If you do not know the people, learn about them. Check them out. Do a back ground check. This is NORMAL. If they get offended, RUN! John Lennon said it best:everybody's got something to hide, except for me and my monkey.

But now that I think about it, I wonder about the monkey sometimes.

When you find a source for the cash, and you will if you stay after it, have a good attorney AND a good CPA interpret the agreement for you so you understand it completely from both a legal and financial point of view before signing it. That agreement may be more costly than a marriage to get out of.

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