Starting a new business in California can be a risky and expensive endeavor. Depending on the type of business you are trying to open, you may need to find ways to get the necessary capital to make your venture come to life. There is angel financing, private equity, and using venture capital which are all viable options that can be utilized to get the money you need to fund your business. There are significant differences between the types of methods that are used to raise the cash needed to start a business and to continue to fund it. So before one method is chosen over another, understanding which is the best for you based on where you are in the business life cycle is necessary for success.
What is the Difference Between the Most Common Methods for Raising Capital?
Just to open your doors, you need capital to get your business up and running and ready to provide services or products to your target audience. The type of capital you need is called startup capital. Getting the seed money necessary to finance your business is not always easy. The initial stages of a California business are the riskiest when compared to other stages of your business’s development. You may get seed money from friends or family, or you could turn to an angel financier. Because of the inherent risk that comes with funding a business startup, if you choose to use an angel financier they will require a large return on their investment.
If you made it to the point where you secured your seed money and you started your business in Los Angeles, and you are doing well, it is likely that you will be looking at how to expand your operation. Being successful and having a solid business model that is proving to work can position you to start growing your company. Venture capital is a good way to get the money you need to make this possible. Obtaining venture capital means that your company will be thoroughly examined to assess the following:
- Are you sustainable?
- Do you have an expanding client and customer base?
- Is your growth strategy responsible and valid to increase your revenue?
Typically, securing venture capital will come with contingencies like having a venture capitalist become an involved part of the management and operations of your company.
Once your business has matured and been successfully established where you have become quite profitable so much so that the money coming in is steady, you will be positioned to take on increased debt. Through private equity, you can make this happen. Due to the minimized risk at this stage in your business’s lifecycle, investors will generally not get as high of a return as an Angel investor would in the very early stages of your business.
Speak to a Los Angeles Business Attorney Today
Funding, running, and managing a business is an intricate and complex process. It takes an incredible amount of work and savvies to thrive. If you need help with your business challenges the Los Angeles business litigation attorneys at Leiva Law can answer your questions and provide you with experienced legal counsel. To schedule your free consultation with the Southern California business attorneys at Leiva Law please call (818) 703-1777.