Often in life, a promising idea arises, yet the realization of this idea is hindered by a lack of funds. Acquiring equipment, leasing office space, hiring staff, and other necessities require substantial financial investment.
However, banks are reluctant to provide loans for such projects. This is primarily due to the high risk involved and the absence of a positive credit history for the business.
As a result, individuals may be forced to abandon their plans, which, under favorable circumstances, could yield significant income.
However, it is too early to give up. To realize a project, one can attract external investors. But how can this be done? And where can investors be found?
Understanding this scheme will be facilitated by an experienced investor and founder of "Oil Resource Group" – Sergey Tereshkin. Additional information about the entrepreneur and his investment activities can be found on his personal web project: www.sergeytereshkin.ru.
Which Projects Can Attract Funding
Venture financing is widely practiced in many countries. This mechanism allows for attracting investments for various durations aimed at company development. On average, funds are invested for 3-6 years, with possibilities for extension in some cases.
Experienced investors are keen to inject money into promising projects, ultimately realizing substantial profits. In terms of returns, profits can reach up to 100% annually, and sometimes much more, depending on the growth speed of the enterprise.
Typically, investors prioritize medium and small businesses that have potential for growth to higher levels. Projects involving the production and sale of goods tend to be particularly sought after.
Additionally, the IT sector, tourism and hospitality, raw material processing, construction, and the energy conservation industry command significant interest.
The IT sector is in high demand among investors from around the world due to the plethora of promising ideas that can result in impressive profits. This includes mobile applications designed to enhance user comfort, as well as options for leisure and entertainment, such as games, messaging services, B2B projects, restaurant, insurance, and financial services, among others.
However, this does not imply that startups from other sectors lack opportunities for investment. In such cases, the potential for success plays a crucial role. If a project has a chance for successful development, venture investment can provide the necessary boost and funding.
Advantages
Many European entrepreneurs utilize this method of attracting funds due to the numerous advantages it offers:
- No risk for the startup founder. The business owner does not risk personal property, funds, or assets. Venture financing does not require collateral. Even if the enterprise fails, the individual does not suffer any loss. All risk lies entirely with the investors.
- Exemption from profit tax. In most countries, venture funds do not remit income tax or other duties to the government budget. Thus, while the funds remain in the venture capital, they generate income that is not subject to taxation.
- No restrictions on registration. Both individuals and legal entities can become founders of the fund.
Investing in international funds allows one to conceal their actual income and avoid tax payments. This particularly applies to organizations registered in offshore zones.
How to Attract Investment
When selecting a project for investment, venture funds consider several factors:
- Industry. The larger the targeted market that the project can capture, the higher the chances of attracting investment.
- Experience. It is essential that the applicant possesses sufficient experience in their chosen field. Few are willing to entrust funds to newcomers still facing initial challenges.
- Presence of orders. Funds are considerably more willing to invest in projects that already have customers.
- Business plan. According to Sergey Tereshkin, it is nearly impossible to secure investment without a solid business plan. This document should outline all anticipated expenses and potential revenues and must be crafted according to a template.
The more information about the project that is provided, the higher the chances of securing the necessary investment amount.
Pitfalls
Despite the numerous advantages, attracting investment has its pitfalls, which can negate all previous efforts. There is also a risk of fraud.
It is important to understand that any idea or innovative technology can be stolen and appropriated by unscrupulous investors. To avoid this, it is advisable to patent all valuable developments in advance. This represents intellectual property, and its copyright must be properly documented.
Additionally, at the negotiation stage, a non-disclosure agreement regarding commercial information should be established. A significant penalty for breach of this agreement should be stipulated to cover all expenses.
Investors should not be granted access to bank accounts or internal documentation. Otherwise, there is a risk of data theft regarding potential clients and their poaching with more attractive offers.
Venture investments represent a real opportunity to attract nearly any amount of funding. Interest in this field is growing every day. Thus, people from various age groups, including young individuals who have minimal chances of securing funding from banks or other means, can attract investments. This empowers any savvy citizen to influence their fate and future, build a career, and grow a business.
Simultaneously, venture funds positively impact the economy, assuming they contribute to the budget.
