• February 2020
    M T W T F S S
    « Jan    

Seeking a Lead Investor for Your First Micro Fund?

lawtrades lead investor microfund

Sometimes valuable opportunities present themselves in small packages. For example, you may have a great idea and need minimal investment to get that idea off the ground. You may have a brand new startup and only require seed funding to begin turning a profit. Or perhaps you are new to venture capital investing and you are eager to begin funding but do not yet have access to the kinds of resources that large venture capital firms generally possess. At times, “a little” does indeed possess the potential to “go a long way.”

Whether you are seeking funding or are looking to invest in a small company’s great idea, micro funding may be the perfect fit for you. Micro funding serves primarily to assist startups and newer companies in funding early stage operations and development. Unlike traditional venture capital investments, micro funding investments rarely top $500 million and can be as minimal as $20 thousand or so. In order to begin a successful micro funding partnership, both venture capital firms and companies seeking investment must be secure in their lead investors. Micro financing can benefit startup companies often better than venture capital investments.

Startups Seeking Investors

If you are a startup or relatively new business seeking micro funding, it is important to partner with investors who understand the process. Traditional venture capital investment firms may not be a good fit for your situation, as they often evaluate potential investments based on sets of criteria that your new business may not align with.

Micro funding firms are generally more willing to take on small startups and new business development as opposed to focusing on long-term investment growth. As there are literally hundreds of micro funding firms currently operating in the United States, it is important to work with the one most likely to provide what your business requires uniquely. As you search for a potential investor, please consider seeking out an experienced legal team in order to best ensure that you are entering into a fair agreement with an investment company that is right for your needs. Failure to take this important step could lead you to bind yourself to terms that may cripple your startup before it truly gets a chance to operate “off the ground.”

Capital Firm Management Seeking Investors

An influential report produced by the Kauffman Foundation indicates that micro funds smaller than $250 million tend to perform significantly better than traditional funds that are larger than this amount. As a result, being a micro fund manager is potentially lucrative, even if you do not have access to the resources that a traditional venture capital firm has. In addition, data like the Kauffman Foundation report can almost certainly aid you in persuading those associated with potential limited partners to invest in any micro funding enterprise you may wish to manage.

It is important to understand the ways in which the market is evolving before approaching those who may serve as potential limited partner investors. The more knowledgeable you are about the ways in which micro funding is evolving, the more confident potential investors may be in your leadership. It is also generally important to be well-versed in the kinds of agreements you hope to enter into both with potential investors and companies you hope to manage investments for. Speaking with experienced legal counsel about potential agreements can help to ensure that you are prepared for this aspect of micro funding investment management and fund raising.

Asking Questions Is Important

Although micro funding is not as risky as investing traditional amounts of venture capital, entering into a micro funding arrangement is still a significant legal arrangement. As a result, it is important for both investors and those seeking funding to obtain knowledgeable and experienced legal counsel before finalizing any micro funding arrangements.

The legal team at LawTrades has extensive experience with micro financing and can help to guide you through the process of partnering with potential investors. It is vitally important to ask questions before signing any legal agreements, because once you enter into an agreement it becomes binding. Asking questions of our legal team will not commit you to any particular course of action, but it will help to ensure that any agreement you ultimately decide to enter into is an informed one.