For a new company just getting started in Houston, Galveston and surrounding areas, finding funding can be a big challenge. A startup could take out a business loan, or the individuals beginning the company could use personal savings or personal loans. These options place 100 percent of risk on those starting the company and there could be significant financial losses.
One other possibility is to seek venture capital funding. This process can be complicated and you will need to have an innovative idea and a comprehensive business plan for this to be an option for you. It is also essential to understand the agreement that you have in place with the investors if you decide this is the right choice. A business law lawyer in Texas can help you to read and understand financing agreements and can assist with the process of determining if a financing deal makes sense for you and your new or growing organization.
Houston Venture Capital Funding
According to Biz Journals, a Houston-based venture capital fund recently closed its third fund. The venture capital fund investments in "seed and early stage companies" and around 25 percent of the previous funds have been dedicated to making investments in Houston-based businesses.
Some of the different companies that have been the beneficiary of past investments include a network security company, which has made the 2014 Fast 100 List put out by the Houston Business Journal. Another company includes a biotech firm that has also received millions of dollars in state and federal grants.
A spokesperson for the fund indicated "we're always actively looking for new investments (in Houston)." Typically, the companies that tend to be most likely to get venture capital funding are those that will likely go public or be purchased or acquired by a larger company within a limited period of time. This means that not all companies can secure this type of funding. Some can, however, especially if they have a strong business plan in place.
When a business is funded through a venture capital firm making an investment, the venture capital investors will receive an ownership share in the company. The amount of stock shares issued to the venture capital firm will depend upon the specific circumstances of the investment and of the type of startup company. Venture capital firms may also become involved to varying degrees in participating in the management of the company and providing decision-making assistance.
Venture capital is a great choice for financing under the right circumstances, but your business needs to be the right one. You need to understand what you give up in terms of control and ownership of the company. You also need to understand what you get as a benefit for taking the seed money and other influxes of cash that venture capital investors may provide. Experienced attorneys can provide important assistance with reviewing investment agreements.
Contact a Houston business attorney if you need help with a start-up company. Call Brewer & Prichard P.C. today at 800-445-8710 or visit http://www.bplaw.com to schedule a consultation. Serving Houston, Montrose, Galveston Island and surrounding areas.