Our thinking - Ways to accelerate deal value
This article reflects Blue Titan Capitals own views, and is a reflection on a longer free copyright paper, published here
BRIDGING THE GAP - INCREASING ACCESS TO VENTURE CAPITAL FOR SMALL BUSINESSES
Starting a business can present challenges for all entrepreneurs, and many cite a lack of funding as a primary obstacle they face throughout their business life cycle.
Unlike large enterprises that can obtain funds from commercial debt and equity markets, small businesses must often rely on their own personal assets, retained
earnings, community banks, and credit unions for needed capital. There is a clearer correlation to a small business owner’s ability to hire and his or her ability to get financing. When small businesses can access adequate financing, they create jobs and spur the economy.
The financing needs of small businesses are as varied as the population itself. The life cycle of a small business can take many forms with very different implications for the types of risks and rewards that lenders and investors can expect. For new ventures that have high-risk profiles and high expected returns, the initial stages require commitments of equity capital sometimes from family and friends, and sometimes in the form of venture or private equity capital.
Moreover, traditional debt financing, like bank loans, does not work for certain businesses like startups that typically lack revenue streams and credit history, making them too high risk for traditional bank lending.
For these entrepreneurs, there are three forms of equity investment that typically target new and early stage firms: angel investing, venture capital, and regulated investment funds, like small business investment companies, or what we call SBICs.
Angel investing generally refers to high net worth individuals who invest
in and support startup companies in their early stages of growth.
In addition to angel networks, entrepreneur businesses can seek venture capital. Because it is equitable in nature, VC is most attractive for new companies with limited operating history that are too small to raise capital in the public markets, and too undeveloped to secure a bank loan.
Beyond the purely private market, the Small Business Investment Company Program, SBIC, which is operated by the Small Business Administration, was created to inject government-backed capital into the market and spur additional investing. By the end of last year, the program had over $25 billion dedicated to small businesses. Similar programs exist across the European Union and UK.
What can we do?
Our next Blog post will continue the discussion above, as this is a long train of thought.
In the immediate, visit our Company page and contact us. We can help you as a company meet your funding requirements. and for investors, we connect you to the brightest growth businesses - our focus is on revenue generative growth companies seeking funding.