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Google Launches Venture Capital Arm: Quick Tips about Venture Capital Plans

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By Caleb Groos on March 31, 2009 3:01 PM

After weeks of rumors, Google announced late Monday evening its launch of a venture capital arm. It plans to invest $100 million over the next year in start-ups across a variety of industries. With new small businesses needing to tap every potential source of funding available, some quick tips about venture capital plans can be useful.

As reported by CNN, Google's venture capital arm will utilize Google's wealth of PhDs to help evaluate companies and select those with the most promising technologies. The types of companies it will seek include those in the internet, software, clean-tech, bio-tech and health care spaces.

Even if your small business won't be pitching to Google, venture capital (though also very tough to come by these days) has to be considered by start-ups looking to grow their businesses. The government stimulus making headlines primarily relates to bolstering bank loans to small businesses. As noted in the Wall Street Journal's Independent Street, while senators push for more bank lending, many small businesses report that a lack of cash flow or collateral makes loans an unviable option.

New businesses have long had to rely on non bank loan financing, including venture capital, angel investors, family and friends. In the case of venture capital, this involves presenting would be investors with a venture capital plan. Here are a few tips about writing an effective venture capital plan.

  1. Make your venture capital plan more strategic than a business plan. In addition to  selling investors on your financial plan, it needs to communicate the business' vision, goals and potential. Because venture investments involve more risk, a venture capital plan should provide more detail than a business plan.
  2. State precisely how funding much the company seeks and how the funds will be spent.
  3. Clearly demonstrate how the company will repay the venture capitalist's investment. Venture capital funds typically expect a large return on investment. This makes an aggressive growth strategy advantageous.

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