Starting a drink company is exciting. You’ve wanted to put something together for a long time. You’ve thought through every aspect of your product. And you’ve decided that now is the time to put your dream into action.
There’s a lot to consider when first starting out. But one of the most important factors in this process can occasionally seem like the most elusive:
Where is the money going to come from to grow your company?
And while procuring the proper funds might seem like a great puzzle, there are actually a group of people looking for opportunities like yours all the time.
They are known as venture capitalists, and they can be a great help when starting a drink company.
But what does that mean? And how can it help?
What is Venture Capital?
A startup company isn’t going to have the available funds needed to establish their infrastructure. Producing the initial product, creating a brand, building a website, scheduling a marketing plan, implementing these systems, and paying employees takes a fair share of resources.
And a company that hasn’t started offering items for sale isn’t going to have a source of income sufficient to cover these and other expenses.
So how does a person cover these costs when first starting a drink company?
Venture capital helps to do just that.
A venture capitalist is a private investor that distributes funds to new companies. They work to find startups they believe to have a high potential for growth.
However, they don’t provide these funds out of the goodness of their hearts. Their initial investment is in exchange for equity in the company. This equity is essentially a piece of the company, meaning the more a venture capitalist invests, the larger percentage of the company they own.
Providing the investor with equity gives them a direct stake in the success of the company.
A venture capitalist is assuming a fair amount of risk by investing in new companies, as it’s reported that about 90% of startups fail. This risk is mitigated as much as possible by their selectivity, and it is rewarded with equity and the potential for large gains.
Visit Brindiamo Group to learn more about securing investments!
How Does it Work?
Although singular people can be venture capitalists, it’s much more common for a group of people to form limited partnerships.
Limited partnerships divide the responsibility for debt between them based on their initial investment. This helps not only divide the risk but centralize the decision-making process for the partnership.
Generally, a committee will be formed to manage the decisions relating to investments. They will analyze the projected growth for a company, the amount of money needed to help them achieve this goal, and the potential returns from the equity to be acquired in the deal.
Venture capitalists are looking for a strong, capable, and knowledgeable management team. They aren’t involved with managing the company or making day-to-day decisions. This means they want to be assured that the people in charge of the operations of the company have the necessary skills and tools to grow the company.
Along with that, venture capitalists look for a strong product or service in an industry with the potential to support continued growth.
The company seeking financing will have put together a detailed plan of what they need to move forward, how much it will cost, and how it will be used. And if the venture capitalist thinks the benefits outweigh the risk, a deal will be made.
How Can You Find Venture Capital?
As we said, a business needs to prove to potential investors that their company shows great potential for growth and continued success. So, you must first make a case that your company possesses these attributes.
You should have a strong business plan before you ever initiate the process of starting a drink company. This will help you in many ways over the years. It can also provide a detailed roadmap for potential investors of how you plan to move your company forward.
But you’ll need to pitch investors before they ever see your business plan. Put together a succinct and dynamic summary. Outline your business, the potential for growth, and the resulting potential for investor rewards. Keep it short — maybe about a page — as this is meant to entice investors and start the conversation.
Don’t simply search “venture capitalist” and contact every entry on the list. Be selective. Find someone that has worked with similar businesses. These partnerships are largely initiated by personal taste and built on trust. There’s no point courting an investor that doesn’t operate in your industry.
Brindiamo Group Helps Connect Companies With Investors
The final consideration for finding venture capital is to approach the investors in an appropriate manner. Many of these partnerships have specific ways they like to be contacted. And this can be difficult to do correctly on your own.
Brindiamo Group helps facilitate productive introductions between those starting a drink company and those looking to invest.