In the late 1990's, the Internet provided a new frontier in which entrepreneurs could try their hand at plying a trade or developing a new enterprise. While "start-up" madness may have subsided when the dot.com bubble burst in the first few years of the new millenium, it hasn't gone away. Whether on the Web or in traditional brick-and-mortar businesses, entrepreneurship is alive and well, and the problem of obtaining start-up capital for new business ventures is usually topic number one when the idea for a new business is born. Following is an overview of the venture capital process and what you can expect if you are thinking about starting a new business.

Sources of Venture Capital

So, you think you've got a great new idea?  You believe that everyone would want your product, if only you could produce it.  Where do you begin?  Unlike in the past, obtaining funding today is a complex and formal dance of give and take.  It is important to be aware of the patterns and progressions before stepping onto the dance floor. A venture-capital funded entity, generally, will go through four stages of development.  Sources for funding will vary depending on where the company is on this time-line.

The "Start-Up" Phase

During the first stage, appropriately called "start-up,"  foundation money and seed capital funding is needed.  Usually, the first line of attack during this phase is the entrepreneur(s)'s family and close circle of friends.  It is important to get at least one financial partner from this inner circle.  Outsiders often will not have faith in a project where the entrepreneur has no demonstrable faith from close associates and family.  However, the entrepreneur must be sure that this first offering complies with exemptions from federal and state registration requirements.  This is to assure that the business does not give initial investors any rights that will encroach upon the venture's ability to attract other investors in the future.