Seed and Venture Capital Financing
Venture capital is typically provided to early-stage start up companies that have high growth potential in industries such as biotechnology, information technology and manufacturing. Venture capital investments are generally made as cash investments in exchange for shares in the company.
The following initiatives have been sponsored by the Federal government to create to help small companies raise capital. Numerous private equity firms also exist to provide funding. These firms tend to invest in businesses within a specific geographic area. Use our Loans and Grants Search Tool to find seed and venture capital programs in your area.
Small Business Investment Companies (SBIC)
In 1958, Congress created the Small Business Investment Companies (SBIC) program to help small U.S. companies raise capital. SBIC's are privately owned and managed investment firms that provide venture capital and start-up financing to small businesses. To be eligible for SBIC financing, your business must meet certain SBA size requirements for a small business. Generally, the SBIC Program defines a company as "small" when its net worth is $18.0 million or less and its average after tax net income for the prior two years does not exceed $6.0 million. When you contact an SBIC, you'll need to present a professional business plan that addresses your company's operations, management, financial condition and funding requirements.
The following resources will help you locate SBIC financing:
- SBA's Guide for Entrepreneurs Seeking Financing provides in-depth information about the SBIC financing and eligibility requirements.
- SBA's SBIC Directory provides a listing of licensed SBIC investment firms in your state.
- The National Association of Small Business Investment Companies (NASBIC) provides a Step-by-Step Guide to SBIC Financing. NASBIC is the trade organization for the SBIC industry, and also provides a directory of SBIC firms.
Active Capital
Active Capital is a nationwide listing service that connects entrepreneurs with angel investors. Potential investors can obtain information on start-ups and expanding small businesses seeking $250,000 to $5,000,000 in venture capital. Active Capital's main benefit is that it allows entrepreneurs to directly access a nationwide network of investors while complying with federal and state securities regulations.
Small Businesses in Economically Distressed Communities
If your business is located in a low-income geographic area, there are a couple of venture financing options available to you. First, there is a special type of SBIC called Specialized Small Business Investment Companies (SSBIC). SSBIC's provide assistance solely to small businesses owned by socially or economically disadvantaged persons. Secondly, you may be eligible for New Markets Venture Capital (NMVC) financing. Modeled after the SBIC program, the NMVC program makes equity investments in small businesses located in economically distressed communities in urban and rural areas. NMVC financing is available in limited areas, and available from these venture capital firms.