Funding Startups Through Joint Ventures:
Why It Might Be Smart To Form A Partnership With An Established Business
Entrepreneurs with brand-new pre-revenue companies, developmental-stage enterprises (DSEs) and fledgling companies having won their first client contracts are, generally speaking, desperately in need of capital. And, generally speaking, most funding sources shy away from companies with limited operating histories and limited tangible collateral assets. Yet these intrepid (but naive) newcomers insist on shopping the capital markets in search of either an investor or lender who will make them the “special exception” and grant them free rein and total discretion with a pile of money. Shopping in this marketplace is all too often a waste of time.
A more viable alternative for any one of these entities in need of cash might be to form a joint venture with an established and synergistic (or complementary) company. Not only do some of these existing companies have capital and credit lines of their own, but in many cases their management teams [at the senior level] have business acumen, contacts and other non-financial resources that can be leveraged by their younger counterpart in the joint venture relationship.
The key, of course, is in finding the right joint venture partner. In order to insure a productive, long- lasting (and non-traumatizing), entrepreneurs might give serious thought to utilizing the services of an outside management consulting firm or agency to facilitate the matchmaking process and to advise and assist in negotiating terms. In the immediate term, this may cost a bit of money, but in the near-term and the longer term, engaging the services of an independent third-party professional firm may save you the costs of a meandering, time-consuming, trial-and-error process.
Give some sincere thought to either financing your startup though a joint venture, or, if you are a well- established organization, to seeking out fresh, new co-venturing and licensing opportunities through an impartial, experienced consultant. In a well-crafted joint venture, all parties win.
If you’d like to reach me directly with your questions about this article or about joint venture possibilities, please contact me at http://bit.ly/CASTLEDIRECT .
As always, thank you for reading me.
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