These are high-risk investments, and as such, investors realize that most of their gambles are not going to pay off. This means they need to see realistic (in their mind) projected returns of 5 to 10 times their investment in just three to five years. If all works well for the firm, the 10 to 20 percent of companies that are oustanding successes makes up for the losses on the remaining percentage. Historically, this formula has provided these firms with an overall annual return of about 25 percent.

In addition to this high return, venture firms want to be out with their investment and profits in 3 to 5 years. The method by which this is accomplished is known as an exit strategy. Virtually no investor, whether firm or individual, is going to want to get married for life. The maximium potential for profit, as a percentage, is during those early years. Once that window has narrowed, they will want the money back to do it again somewhere else. The exception to this would be when it involves second and third stage funding.

An estimated $3 billion is commited annually through the hands of these investment bankers.The minimum amount these firms are willing to invest can be as little as $50,000, but most look for higher amounts, with many starting at $500,000.

As with most forms of capital, access is largely dictated by the current economy. During boon periods such as the early to mid '80s, money was being slung about in every direction. Funding new ventures was so popular that there was even a magazine called Venture added as a mainstay to magazine racks everywhere.

By 1990, these "high rolling" venture firms had all but "rolled over" and dried up, becoming so concervative (by venture standards) that they were actually turning their nose up at 99 out of every 100 proposals. Venture magazine, an icon of the preceding decade, was laid to rest. And when you consider how many of the accepted 1 percent were repeat customers and staged-growth funding, the odds looked much bleaker.

But the good news is that in recent years there has been a resurgence in the growth of venture capital firms—not to the degree of the '80s, but welcomed growth nonetheless. With the right mix of product, management, and marketability, you may again receive a warm embrace from traditional venture capitalists.

Don't assume one firm is as good as another. There exists a varied degree of preferrences among these financers. Some prefer to provide seed money for start-ups, while others focus on later stages of funding or leveraged buyouts. Some firms only focus on specific industries or geographic areas. All firms will provide you with a "fact sheet" with information about the types of busineeses they've financed in the past. See Appendix A for a complete listing of venture capital sources. See Appendix B for sources on the internet.

The qualifictions are stiff, as is the competition. If you score high in these areas, you would not be wasting your time to play "traditional pursuit."

MANAGEMENT
The key here is "TEAM." They want to see a well rounded management team with experience in all areas of business: Marketing, administration and manufacturing. Each key player should be heading a different area of the business. The ideal team has 3 or 4 players.

PRODUCT
The most attractive products are ones that already have an established market, but are one or more years ahead of competing products. This competitive edge can be derived from innovations in design which make it superior, or innovations in manufacturing which make it cheaper, or, as is the trend lately, innovations in marketing.