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Venture Capital Financing--Stages of Business Development

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<html> <head> <title>Venture Capital Financing--Stages of Business Development</title> </head> <body> <h1>Venture Capital Financing--Stages of Business Development</h1> <div class="info">Author: <a href="http://lenstillman.articlealley.com/">Len Stillman</a></div><div class="body">There are many stages in venture capital financing. Defining the current stage of your project is important so you don´t waste your time or the time of potential venture capitalists.<br /><br /><b>Early Stage Financing:</b><br /><blockquote><b>Seed Financing</b>--A small amount of money is involved (usually $50,000 or less). Funds are used to develop a concept. This is the earliest stage of venture capital financing. The investor (often referred to as an angel) is expecting to reap a large percentage ownership should the concept prove to be feasible and marketable.</blockquote><blockquote><b>R&D Financing</b>--This is a tax-advantaged partnership set up to finance product development. Investors secure tax write-offs for their investments. If the product becomes successful, they share in the profits.</blockquote><blockquote><b>Startup</b>--Money is used for product development and initial marketing. While startup companies are organized, they typically have not yet sold their products commercially.</blockquote><blockquote><b>First Stage</b>--The entrepreneur usually has developed a prototype. Funds are used to initiate full-scale manufacturing and sales.</blockquote><b>Expansion Stage Financing:</b><br /><blockquote><b>Second Stage</b>--In this stage, working capital is for the initial expansion of a company that is shipping products but may not yet be showing a profit.</blockquote><blockquote><b>Third Stage</b>--This is also called "Mezzanine" financing. Capital at this stage is used for major expansion including physical plant expansion, marketing, and working capital.</blockquote><blockquote><b>Fourth Stage</b>--This is also referred to as "bridge" financing. This is financing for a company expecting to go public within six months to a year. Often bridge financing is structured so that it can be repaid from the proceeds of a public underwriting.</blockquote><b>Acquisition/Buyout Financing:</b><br /><blockquote><b>Acquisition Financing</b>--Funds are provided to a firm to finance its acquisition of another company.</blockquote><blockquote><b>Management LBO</b>--Funds are provided to enable an operating management group to acquire a product line from either a public or private company concern, often the very company they work for. (LBO means leveraged buy-out.)</blockquote><blockquote><b>Public Market</b>--This is the purchase of over-the-counter stock. The venture capital investor is typically directly involved with improving the company.</blockquote>© Copyright 2006, Leonard M. Stillman Jr., All Rights Reserved.</div> <div class="source">Article Source: <a href="http://www.articlealley.com/http://lenstillman.articlealley.com/venture-capital-financingstages-of-business-development-42524.html">http://www.articlealley.com/http://lenstillman.articlealley.com/venture-capital-financingstages-of-business-development-42524.html</a></div> <div class="author"> <div class="authorOccupation"><strong>Occupation:</strong> Business Owner/Consultant</div> <div class="authorBio">Len Stillman is the owner of <a href="http://www.BusinessPlanTools.com" rel="nofollow">Business Plan Tools, LLC</a> and the <a href="http://www.ThriftyShoppersClub.com" rel="nofollow">Thrifty Shoppers Club<a/>. He has served entrepreneurs, banks, and investors for over 35 years. You are invited to learn more about the information in this article by visiting his <a href="http://businessplantools.blogspot.com" rel="nofollow">Business Plan Tools blog<a/>.</div> <div class="authorUrl"><a href="http://www.businessplantools.com" target="_blank">http://www.businessplantools.com</a></div></author> </body> </html>

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Venture Capital Financing--Stages of Business Development Author: Len Stillman There are many stages in venture capital financing. Defining the current stage of your project is important so you don´t waste your time or the time of potential venture capitalists. Early Stage Financing: Seed Financing--A small amount of money is involved (usually $50,000 or less). Funds are used to develop a concept. This is the earliest stage of venture capital financing. The investor (often referred to as an angel) is expecting to reap a large percentage ownership should the concept prove to be feasible and marketable.R&D Financing--This is a tax-advantaged partnership set up to finance product development. Investors secure tax write-offs for their investments. If the product becomes successful, they share in the profits.Startup--Money is used for product development and initial marketing. While startup companies are organized, they typically have not yet sold their products commercially.First Stage--The entrepreneur usually has developed a prototype. Funds are used to initiate full-scale manufacturing and sales.Expansion Stage Financing: Second Stage--In this stage, working capital is for the initial expansion of a company that is shipping products but may not yet be showing a profit.Third Stage--This is also called "Mezzanine" financing. Capital at this stage is used for major expansion including physical plant expansion, marketing, and working capital.Fourth Stage--This is also referred to as "bridge" financing. This is financing for a company expecting to go public within six months to a year. Often bridge financing is structured so that it can be repaid from the proceeds of a public underwriting.Acquisition/Buyout Financing: Acquisition Financing--Funds are provided to a firm to finance its acquisition of another company.Management LBO--Funds are provided to enable an operating management group to acquire a product line from either a public or private company concern, often the very company they work for. (LBO means leveraged buy-out.)Public Market--This is the purchase of over-the-counter stock. The venture capital investor is typically directly involved with improving the company.© Copyright 2006, Leonard M. Stillman Jr., All Rights Reserved. Article Source: http://www.articlealley.com/http://lenstillman.articlealley.com/venture-capital-financingstages-of-business-development-42524.html About the Author: Len Stillman is the owner of <a href="http://www.BusinessPlanTools.com" rel="nofollow">Business Plan Tools, LLC</a> and the <a href="http://www.ThriftyShoppersClub.com" rel="nofollow">Thrifty Shoppers Club<a/>. He has served entrepreneurs, banks, and investors for over 35 years. You are invited to learn more about the information in this article by visiting his <a href="http://businessplantools.blogspot.com" rel="nofollow">Business Plan Tools blog<a/>. http://www.businessplantools.com

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by Len Stillman
Len Stillman is the owner of Business Plan Tools, LLC and the Thrifty Shoppers Club . He has served entrepreneurs, banks, and investors for over 35 years. You are invited to learn more about the information in this article by visiting his Business Plan Tools blog .
URL: http://www.businessplantools.com

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