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When Are Grants Better For You Than Venture Capital?

Tyler G. Hicks

by Tyler G. Hicks

VENTURE CAPITAL is available for a number of businesses that are developing products for large markets. And grants may also be available for the same businesses. So which should you take–venture capital (VC) or a grant? To decide, remember:

  • Venture capital is an investment in a corporation–purchase of stock.
  • With venture capital you give up ownership–typically 30% to 50%.
  • When a lage block of ownership is given up, 50% or more, you're an employee once again, working for the venture capitalist.
  • Grants do not require that you give up any ownership–you own 100% of the business to which the grant was made.
  • A grant may be distributed in parts–a $100,000 grant, $20,000 at a time. This can be highly motivating to you, making you to work more.
  • A small grant may be followed by a big grant if the work is successful and has been done as promised, on time.
  • Most grants are given for product development–marketing is not covered by the grant. So you must find more money for marketing.
  • Plenty of money is available for grants but it can be slow in being delivered to you because of required paperwork.

SO IF YOU DON'T WANT TO GIVE UP OWNERSHIP of business, you'll take the grants funding. Or, if you need large amounts of money, say $1-million and up, you'll go for venture capital. To get either type of funding:

  1. Your business must–in general–be organized as a corporation.
  2. You must be doing practical research that can lead to useful products for large entities–such as the Department of Defense, U.S. Department of Health, the Office of Homeland Security, State Education Department, City Health Department, State Electric Power Company, etc.
  3. Research you're doing must be conducted in a formal lab or manufacturing setting–it's almost impossible to get a research grant for a home business because agencies want practical results.
  4. Non-corporate grants are available for small businesses in the fields of book publishing, theatre production, and arts (painting, sculpture, etc.) of various types. These are generally obtained from the National Endowment for the Arts and from similar state of city groups. The work being done can be performed at home. Venture capital is –in general– NOT available for these types of activities because they do not meet the profit goals of VC.

TO GET THE GRANT YOU SEEK you must submit a Proposal detailing (a) how mush money you need, (b) the purposes for which the money will be used, (c) what benefits the public, the government or other groups will derive from the work. Submit your Proposal to government (State, Federal) and private grant givers.

Copyright © 2004 by International Wealth Success, Inc. All rights reserved.

Author Bio

Tyler G. Hicks, the president of International Wealth Success Inc., is the author of many wealth building publications, including the Raising Money from Grants and Other Sources Success Kit and the Phone-In / Mail-In Grants Kit.