A Venture Capital Primer for
Small Business
Financial Management Series
U. S. Small Business Administration
April 2009
Helping Small Business Start, Grow and Succeed
A Venture Capital Primer for
Small Business
Financial Management Series
FM -5
LaRue Tone Hosmer
Professor and Chairman
Graduate School of Business Administration
The University of Michigan
Ann Arbor, Michigan
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Business Administration does not necessarily constitute an endorsement of the views and opinions of the
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Office of Entrepreneurship Education
April 2009
U.S. Small Business Administration
2
TABLE OF CONTENTS
INTRODUCTION
4
WHAT VENTURE CAPITAL FIRMS LOOK FOR
5
ELEMENTS OF A VENTURE CAPITAL PROPOSAL
8
PROVISIONS OF THE INVESTMENT PROPOSAL
9
TYPES OF VENTURE CAPITAL FIRMS
12
THE IMPORTANCE OF FORMAL FINANCIAL PLANNING
13
INFORMATION RESOURCES
14
U.S. Small Business Administration
3
INTRODUCTION
Small businesses never seem to have enough money. Bankers and suppliers, naturally, are important in
financing small business growth through loans and credit, but an equally important source of long term growth
capital is the venture capital firm. Venture capital financing m