Why VCs Can Prove Invaluable To Tech Startups

Tech startups are popping up left and right. There were more startups launched in 2017 than in the previous four years. On an annual basis, there are about 1.78 million tech startups launched around the world. Cities outside of Silicon Valley are making it easier for entrepreneurs to grow their businesses in blooming environments and a more lax startup culture. And yet, half of all startups will fail within the first few years. To increase their chances of survival, entrepreneurs are working with knowledgeable venture capitalists who can help propel their business to the next level.

“While many people understand the most obvious benefit of working with a venture capitalist—receiving early funding for the business—the truth is, high quality VCs can offer much more than monetary assistance, and should,” says Lee Jacobs, a venture capitalist who’s invested in dozens of tech startups. “They can provide strategic guidance, network access, marketing support, and actual hands on support.”

Roughly one-fifth of all current public companies in the United States receive funding from venture capitalist. With that in mind, here are a few other ways that venture capitalists can prove invaluable to tech startups.

IMAGE: PEXELS

They Begin A Long Journey With You

When you’re just raising funds for the first time, early VCs will remain with you on your startup journey for the long-haul. Series A venture investors remain on board for anywhere between 5-9 years on average (longer than the average marriage in the United States). This means you’ll have a true partner on your side, and like any relationship, you’ll need transparency and trust to nurture growth. A great VC will outfine a fair term sheet, and a great entrepreneur will abide by them. Both parties should put in work to create a seamless working relationship.

You’re Get The Chance You Need

Venture capitalists are known for investing promising innovative companies that have strong potential for growth. Typically, these investments err on the risky ride—but for many entrepreneurs, this is the initial chance that they need to prove themselves. Because most companies fail within the first couple years, VC funds aim to invest in companies using smaller-scale investments—and therefore taking less stake in the company—that can generate huge returns.

Networking Opportunities

Venture capitalists network constantly. After all, it’s part of what allows them to be successful. On a daily basis, they’re meeting new people. This level of exposure puts them at the forefront of new technology and various industry trends. Their networking circle can prove particularly beneficial to the entrepreneurs you work with.

The bottom line is, a VC investment can only be as successful as your business is. Therefore, they’re always sticking their neck out for you and connecting dots where it matters most.

There Are Operational Benefits

Venture capitalists know what they’re doing, and have often been in your shoes before. In many cases, you’ll find that your VC has assumed a founder or marketing role at another startup in the past. This means that not only do they understand you, but they can relate to you as well.

Your VC can assist with the trials and tribulations that every startup—regardless of industry—goes through. These initial hurdes can be difficult without proper guidance, especially if this is your first time starting a company.

They Can Close Sales

As an entrepreneur, you’ll sometimes find yourself in a meeting with a big client who can make large purchase orders that allow your business to grow. However, as a new business, not only can it be difficult to score these high-profile meetings, but it can also be taxing to convince major clients that despite your minimal track record, you can deliver.

This is where your VC will step in on your behalf. Having a reliable VC with a proven track record helps validate your company. As such, it becomes significantly easier to convince major clients that you won’t fail within the next year or so.

An Effective Exit Strategy

You may not be thinking about an exit strategy so early during startup infancy, but it’s something that should at least be in your peripheral line of thought. Good investors will have terrific advice on an exit strategy that works to your benefit.

“VC-backed companies make up a consistently high fraction of those companies undergoing initial public offerings,” according to Stanford Business. “Between 1979 and 2013, over 2600 VC-backed companies had their initial public offerings. They made up 28% of the total number of U.S. IPOs during that period.”

If you are interested in even more business-related articles and information from us here at Bit Rebels, then we have a lot to choose from.

IMAGE: PEXELS