There are many venture capital firms in Massachusetts, each with its own focus and area of expertise. Here is a list of the venture capital firms in Massachusetts, along with some additional information about venture capital and how it works.
List of Top Venture Capital Firms in Massachusetts
There are many venture capital firms in Massachusetts, each with its own focus and area of expertise. Here is a list of the top Massachusetts venture capital firms.
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What is Venture Capital?
Venture capital is a high-risk investment, usually in young companies that have potential for huge returns. Venture capitalists help these growing companies by giving them money and business guidance, with the expectation that if the company grows, then the venture capitalist will also see a huge return on their initial investment. They are usually more interested in companies with innovative ideas which create new markets.
What Types of Companies Use Venture Capital Funding?
A venture capital firm typically provides financial and management assistance to an entrepreneurial company that cannot get traditional bank loans or other financial assistance because its business model may be high-risk. The following types of companies most commonly receive venture capital funding:
- Different technology sectors such as the following:
- Computer hardware
- Computer software
- Internet-specific companies like search engines, social networks and e-commerce sites
- Biotechnology (both pharmaceutical and bioengineering)
- Consumer retail products (i.e., a company that makes a new type of consumer product, such as a cell phone, MP3 player or computer)
- Healthcare, medical devices and other life sciences products or services
- Green technology including solar, wind power, and hybrid engines
- Adaptive equipment for disabled individuals
Venture capital firms usually do not invest in real estate, oil and gas, manufacturing equipment, or commodities. They also typically avoid retail and food service businesses.
Tips for Attracting Venture Capital in Massachusetts
- Know Your Audience – Do your research and find out who the venture capitalists are and what type of companies they invest in. Different firms have different specialties, so it is important to pick a firm that both has experience with businesses like yours and an inclination to want to invest in such types of companies.
- Have a Clear Business Plan – The venture capitalist firm will need to know how much money you are requesting, what you will do with the funds, and how much of the company the funders will own after they invest. Know what your product is worth and who your ideal customer is. Be ready to explain all aspects of your business in clear detail.
- Get Professional Help with Your Financial Model – It is important to make sure that your business plan and financial model are both sound, with accurate data. Hiring a professional business plan writer can help you prepare a comprehensive proposal.
- Be Aware of Target Markets and Competition – Venture capital firms are looking for high growth potential, so it is important to not just discuss your own company but also how the market may change over time and what the future of your industry looks like. It is also critical to understand your competitors’ strengths and weaknesses, as well as how you will overcome any challenges they may present.
- Keep Building Relationships with Potential Investors – While the first meeting may be where you make your first impression, it is important to stay in touch with potential investors. Send them updates about your business and attend networking events where they will likely be present; this will help keep their interest piqued.
- Be Willing to Listen – Venture capitalist firms are looking for entrepreneurs that are flexible, open to input, and willing to adapt their plans as needed. They will want to know that you listen to their concerns and are capable of making adjustments when necessary.
As an entrepreneur in Massachusetts, it is important to understand how venture capital works. No matter what product or service your business offers, if you find the right firm you could get the funding you need to succeed.
Understanding the Stages of Venture Capital Funding
There are several stages or venture capital rounds which an entrepreneur may use to get started. Understanding each of these stages can help you determine which route is right for your business.
- Early-Stage Funding: The first round of funding, sometimes called the “seed stage” typically consists of a few investors putting up $1 million or less to help get an idea off the ground and gain traction in the marketplace. This money is often provided by friends and family members of the founders, but can also come from an angel investor or venture capital firm.
- Startup Funding: This is the Series A round, and it typically consists of $4 million to $10 million. At this stage, a business will have a professional management team as well as product or service offerings. This round can be provided by venture capital firms, larger angel investors, or wealthy individuals who don’t mind more risk for the potential of a greater reward.
- Growth Stages:
- The Series B round can consist of $15 million to $20 million or more, and is typically used as a bridge between the startup funding stage and the next series of funding rounds which will likely cost upwards of $40 million. At this point, a business may have been able to establish a strong customer base and may be looking to grow with plans for international expansion, patenting aspects of the business, or developing partnerships with related companies.
- During the Series C round, between $30 million and $80 million is typically offered by venture capital firms. This is usually the largest funding round at which point a business will have fully entered the growth phase. There will be revenue coming in from multiple sources, and at this stage there should be a professional management team with diverse skill sets to help get the company to its next level of success.
- The final rounds of funding are known as Series D, E, F, etc., and it’s when venture capitalists will help build the company towards an IPO or sale to another company. Of course, the smaller the firm is at this point, the less money it can expect to receive; however there should still be a considerable amount of capital available.
Other Investors in Massachusetts
If your company isn’t ready or not eligible for venture capital funding, there are other options for obtaining startup cash.
Angel Investors: These are often accredited investors who provide funding to early-stage companies, and there may be less red tape compared to venture capital firms.
Crowdfunding: If your business is in a more advanced stage and you want to make it available for public consumption this is an option, but keep in mind that crowdfunding sites like Kickstarter and Indiegogo take a percentage of profits from any projects which meet their fundraising goals.
Personal Loans: Friends and family members may be willing to loan your company money. Just be sure to have a signed loan agreement in place which includes the stipulation that you will be required to repay the full amount in a specified number of installments.
Private Equity Firms: These are similar to venture capital firms, but they typically have fewer restrictions and may be more willing to take a risk on startups in exchange for a larger potential return.
Bank Loans: Get a bank loan from your local community bank, credit union, or other small business lender. Banks will require more paperwork and investment in the business than other methods of obtaining startup cash.
How Growthink Can Help
Growthink is a national business consulting firm headquartered in Los Angeles. Since 1999, our business consultants experts have written more than 5,000 strategic business plans for entrepreneurs, small businesses, mid-sized firms, and Fortune 500 corporations seeking funds from venture capitalists, angel investors, or other investors. We can help your business, too!
Learn more about Growthink’s business plan consulting services and methodology.