The New Wave in Small Business Financing

This is HUGE. This is tsunami in the making. Small business financing is on the brink of tapping into billions and billions of dollars that previously shut it out.

The signs are quiet. One venture capital firm announced that it had just funded an internet startup for $250,000. Another announced it had just brought in a new partner whose previous background was in angel investment. A third announced it would be sending a senior partner to a business plan competition.

Don’t get me wrong. Every one of these things has happened many times before. But this time it is different. This time they are announcing it.

One of the closest guarded secrets in venture capital is that venture capital firms do indeed make small investments, and have for as long as anyone can remember. These small loans are typically made to startups that just need a jolt of cash to get to the first stage, to give them breathing room to get a prototype made or have a marketing study completed. The venture firm typically takes a first option on future investments for these small investments, plus a bit of stock or interest or whatever.

The reasoning behind the small investments was never to make money, and these investments didn’t make money. If everything worked out okay, the small company could apply for significant venture funding when the time came.

Well, now there’s a new kid on the block.

This time the expectation is that these small investments WILL make a return, a goodly return in fact.

This time the small investments are aimed squarely at internet startups. That’s right – that industry that drove the venture capital industry to the dotcom disaster is back with a vengeance. Seems like the internet and venture capital are two lovers that just can’t stay away from each other for too long.

And this time it makes a lot of sense. Most internet businesses can begin easily with way less than a million in investment. Some need no more than a couple of programmers and a marketing person. With the right concept, the success comes rapidly and the internet business becomes self-sustaining in no time at all. And, if you take a look at the internet roster, you will see a long list of very successful companies that started on next to nothing.

This is the success that the venture capital companies are going after. Percentage-wise, there are huge profits to be made.

Smart venture capital companies are streamlining the application process. One, in fact, only requires the approval of one partner for investments up to $250,000.

The business plans for these internet companies will be like none other. No 200-page bound treatises here. Nope.

Short. Sharp. Nimble. A presentation that demonstrates the entrepreneur’s grasp of the industry and its rapidly evolving nature is the business plan of the day.

An online demo is essential.

And the power to turn all the equipment off and look the venture investor in the eye is also essential.

Those entrepreneurs who can provide vision and knowledge are sitting in a pot of jam. There are literally billions and billions of dollars waiting for you. Go get it.