So the interest is there. Some venture capitalists prefer only to fund companies beyond the start-up phase, while others look for earlier stage opportunities. Venture capitalists usually look for an enterprise that has the potential to grow to a significant size quickly, generate an annual return in excess of 40 percent and provide liquidity in three to five years. And, venture capitalists like to invest in information technology and telecommunications companies, with the next largest amount going to life-science companies. Companies in other industries that can show optimal rates of return will also attract investors.
Venture capitalists know the trials and tribulations that come with start-ups.
Venture capitalists know how to help grow a company to an initial public offering, sale or other liquidity event. Venture capitalists have great contacts and can help recruit members of the management team. They may want to assert more power in molding the company and may want to take control of the enterprise or change the management team if the entrepreneur falters. They may demand a lower valuation, and therefore more dilution, than angels or friends and family members might. Venture capital firms are usually easier to find than angels, but it pays to do some homework before choosing one.