Venture Capital general question

[Account Closed]

I opened up my own company around 2 years ago after becoming frustrated with partners not performing.  Now that I own and operate my own business I have become frustrated with the never ending costs associated with continuing to build the business.  It seems like growth equals expense and expense slows growth while adding stress in the process! 

I know stress is good to some extent, as it raises the fear of failure, but I am very confident in the business and am concerned that with my lack of capital I may miss some important opportunities in my market.  I started this company with nothing, and am interested in exploring the opportunity to advance the company more quickly while stabilizing it financially as it continues to grow. 

In a nutshell.....My car is running but I could use a few new parts to run faster and more efficiently.

I didn't draw a business plan, I drew a battle plan.  However, I was unable to include many of the operating resources I needed to make an all-out-attack.   This may have been a blessing because it gave me the focus to ensure we built a strong reputation amongst our clients. 

I know how investors think, mostly.  And would be most interested in using capital to build a multi-use building so that there would be an actual cash-producing asset as a majority part of the deal.   Which I could also build at cost since I am a GC, and I could manage as a PM.  It would serve as my base of business operations and would be built to function energy independently giving us immediate marketing benefits and operating cost savings.

How does venture capital work?  Will venture capitalists settle for a fair return, or will they be expecting to buy a percentage of my company's income into perpetuity?  Any insights are greatly appreciated.

[J Scott]

A typical VC is in no way, shape or form interested in cash flow.  VCs are smart gamblers who make their money through large liquidity events -- companies going public, getting acquired, etc.  For the most part, a VC is going to make a lot of bets, with many of them returning little, some of them breaking even and then hopefully at least a small percentage returning many, many times the investment.  

Unless you provide an opportunity for the VC to receive an extraordinary return on investment, they aren't going to want to "dollar cost average" their portfolio with you.  This is why VCs tend to focus on certain industries -- like technology -- where startups are often valued at many, many times their income just based on hype and potential.

What you're looking for are private investors who are willing to invest for a low-risk, stable return.