What is a venture capital scout?
A venture capital scout acts as a go-between between the fund and the individual. They work outside of the fund independently on their own.
What do they do?
Venture scouts are primarily about building and forming mutually beneficial relationships.
They identify promising startups at the early stage and pass on the deal to venture firms. Venture scouts act as a bridge to form a deal between the venture capital firm and business owner. They advocate and share information on the venture capital firm to the individual interested in funding.
Many companies are not aware that they need funding. They think they can apply for traditional finance or go the mainstream route. Often many do not realize they need help until a vc scout reaches out to them. However, some may be aware of their need for funding but lack the knowledge and resources to acquire funding.
This is where venture scouts step in. Often they will invest small check sizes ($25K — $50K) in very early-stage companies. They are the first initial investors in the start-up phase for business owners, which is critical for the success of the business.
Following this initial funding, the vc scout passes the business owner over to the venture capital firms, who can fund more significant amounts of money to help the business to expand and grow.
What are they known as?
How do they help?
Well, the vc scout’s role is to help. They connect the dots so to speak. The client or business owner requires finance, so they provide initial funding to get them on track. Then they link them with a venture capital firm which will provide them with greater amounts of funding ($50,000 and upwards).
The scout role is an important one because it acts as a go-between between the business owner and venture capital firm. Often top venture capital firms advertise their services and attract the client that way, and so they do not rely on word of mouth. That’s where the vc scout comes in, sharing the information with the client and getting them in contact with the VC firm.
The benefit for the vc scout is they get a referral commission for referring the client to the top venture capital firm which can go from $5k upwards. As they are first to invest in the firm, they also get compensation by way of shares/ownership in the company.
The scout role is not to be underestimated acting as an important conduit between the two parties. Without the scout in some instances, many businesses would miss out on funding for their business altogether, which would mean they wouldn’t be able to expand their business down the track.
They may apply to traditional sources of funding and get knocked back because they haven’t got the adequate paperwork and the right checks and balances.
I need funding, where do I start?
If you have identified you need funding then that is great. The first place is connecting with a venture capital scout. They will get you on the right track and may even provide initial funding to get you started.
Reach out here for more information.
What is the next step?
Once you have connected with a venture scout they will be able to point you to the right venture capital firm that suits your requirements, depending on your location, business size, and capital requirements.
If you need to meet with someone to discuss your business expansion they will organize any meetings you may need to have.
You will need to start gathering important business information such as:
- business plan
- financial plan
- ownership paperwork
- certificates of registration
- annual reports
This paperwork is required to prove your ownership of the company, and also to show what your plans are for the company. If you do not have these plans, then you must write up a plan for your future expansion. Without a plan then you won’t have a shot with the Venture Capital company.
So when you are ready gather those pieces of information together and then reach out to your venture scout, they will help you coordinate everything.
Venture scouts are much needed in the business world, connecting the dots between those that need funding and those that want to fund.
Business owners love venture scouts because they provide a much-needed avenue to get funding. By getting VC eyes on their business and their business plans, the business owner has greater chances of expanding their business, and ultimately success.
Reach out to a venture capital scout today.