Which industries attract venture capital?
Above all, venture capitalists seek industry segments poised for rapid growth and exceptional profits. Does this sound like the types of businesses that would be franchising or licensing a product or business model? Yes.
In most cases, when looking to raise venture capital, sustained growth and profitability beyond a five year horizon is essential to create a premium exit value in a public offering or sale. For these reasons, franchise development can provide an attractive offer for a potential venture capitalist to consider a business opportunity. Ordinarily, emerging markets and industry segments can also offer these characteristics. Occasionally, a new segment within a mature market, or a new method of solving an existing problem, creates a sustained, rapid growth opportunity - again a trait that is typically associated with franchise development or franchise expansion. For instance, a new distribution model developed by a retail chain to capture market share from then existing "mom & pop" operations could create an interesting venture capital scenario from what was a mature market.
The benchmark for Venture capitalists is a market that is sufficiently large enough to achieve $100 million or greater in value. Market critical mass is necessary to produce liquidity in a public offering or sale. Small markets
Occasionally, there will be niche markets with unusually high barriers to entry will drive profitability sufficient to build substantial value and liquidity. Most venture capital funding has gone to the information technology and health care industries. Most segments within these two industry categories are large and growing rapidly. By franchising a business effectively, you can turn a business that is typically non-scalable into a leveraged, high-growth business concept. Franchising not only allows organizations to expand quickly and efficiently.
For more information on strategies used to raise capital and how to franchise contact Franchise Marketing Systems - (800) 610-0292
may not attract attention from stock analysts or strategic buyers sufficient to generate premium values. These again are reasons that franchising a business or developing an effective license model can create optimal investment opportunities for venture capitalists.