- Ways to raise money for your business, and a list of venture capital firms in Connecticut
- For Connecticut businesses looking for funding
- Learn more about fundraising methods and see which first may be able to assist you
When a startup shows the potential for considerable growth, it may gain the attention of venture capitalists. VCs may be investment banks, wealthy individuals, or other firms looking to earn a high return on investment by supporting an early-stage company.
Entrepreneurs seeking VC funding must first find a source of venture capital and submit a proposal, including a business plan demonstrating the growth potential of the company. If a VC agrees to invest in the company, an agreement is made where the funds are provided in exchange for an equity stake in the company.
Along with the equity, the VC will typically take an active role in company affairs such as providing advisory service. Additional funding may be provided at a further date. The VC exits the company some years later, either by cashing out their equity or taking a share of the proceeds when the company is sold or acquired.
This article explores the different kinds of VC investments available to entrepreneurs. We also look at some VC firms that cater to Connecticut businesses.
Note: VCs typically limit their investments to specific endeavors and only finance a fraction of the requests they receive. If your business is not a good fit for VC funding, you can learn about other financing options here.
There are four stages of startup funding. Entrepreneurs can begin making a pitch for financing before they even begin operations, collect funding to develop their idea and expand their offerings, and ultimately choose to go public.
In this stage, an entrepreneur must convince investors that they have a profitable business idea and that they, along with any partners or team members, are well-situated to develop it. This is the riskiest stage for investors, as the business has not been developed and an entrepreneur will lack the performance data, financial information, or other metrics to help make their case.
Entrepreneurs often seek pre-seed funding not only from VCs, but also from angel investors, family members, and friends.
After raising pre-seed funding, entrepreneurs continue fundraising efforts to support market testing, product developments, and other efforts to prepare products for sale or get services ready for marketing.
At this stage, investors will be looking at the company’s operations to see how well it can solve a need and reach a market. Naturally, there is still a considerable risk at this point, as the business may not be gaining traction. Ideally, seed funding will accompany the development of a client base, sales growth, or other signs that revenues are growing and the company’s offerings are finding customers.
Series funding involves several tiers of funding for startups to raise more money and increase their valuation. While the company remains private, each series provides further assurance that the business is generating consistent revenues and seeing growing demand. At this point, the risk is significantly reduced and the company will become more attractive to private equity firms and investment bankers.
Initial Public Offering
A company can choose to go public through an initial public offering once it becomes large and stable enough. A successful IPO will be profitable for investors and further bolster a company’s reputation.
Investors can exit the company through an IPO as well as a sale, merger, or acquisition. Entrepreneurs that can make it this far in the process often have several investors with a stake in their company, which reduces their own equity share but also yields a higher return due to the business’s greater value.
There are several venture capitalist firms in the Connecticut market. Entrepreneurs should be aware that these firms often have specific areas of focus, so you should research each VC before making a proposal.
23 Old Kings Highway, Darien, CT
Alerion Partners invests in companies that have high growth potential in consumer products, marketing, and business services, and targeted media. This VC typically prefers companies that can demonstrate a certain level of market validation through revenues, customers, or other metrics. The firm also prefers to be the lead or major investor, and provides initial investments of $3 million to $10 million.
285 Riverside Ave., Suite 250, Westport, CT
Canaan Partners invests in “visionaries with transformative ideas.” Its focus areas include focus areas include fintech, enterprise/cloud, marketplaces, frontier tech, biopharma, digital health and medtech.
2507 Post Road, Southport, CT
CHL Healthcare Partners focuses on starting and growing healthcare businesses. The investment firm provides initial investments of $100,000 to $7.5 million, and can invest up to $15 million in a single portfolio company over the life of the investment. CHL Healthcare Partners may also take an interim management role in the company, including setting corporate goals and hiring operating staff.
865 Brook Street, Rocky Hill, CT
Connecticut’s “strategic venture capital arm,” Connecticut Innovations is a leading source of financing and support for innovative, growing companies in the state. A variety of venture options are available, including equity financing of up to $1.5 million per round with a maximum investment of $7 million in any one company, debt financing of up to $2 million, pre-seed investment of up to $150,000, proof-of-concept investments of up to $100,000, and the Connecticut Bioscience Innovation Fund. Connecticut Innovation also offers lending and grant options.
45 Rockefeller Plaza, Suite 2000, New York, N. Y.
This founder-focused boutique venture capital and private equity firm follows a “non-correlated, industry-agnostic portfolio investment strategy.” Entrepreneurs are invited to send pitches through an online contact form.
Three Pickwick Plaza, Suite 302, Greenwich, CT
Oak Investment Partners is a multi-stage venture capital firm focusing on high-growth opportunities in the information technology, internet and consumer, fintech, healthcare information and services, and clean energy sectors. Oak’s investment strategy includes serving as a lead or co-lead investor and taking a patient approach to assist companies through challenging business and marketing cycles, and the firm also maintains a global network of professional contacts for strategic assistance.
4 Armstrong Road, Suite 230, Shelton, CT
Saugatuck Capital has managed four dedicated private equity funds and currently manages five special purpose funds. The firm seeks to make private equity investments in niche middle market companies with “exceptional management teams and unique opportunities for growth.” The firm focuses on established companies with revenues of $15 million to $100 million, and does not offer financing to high tech, real estate, or financial businesses.
33 Whitney Ave, New Haven, CT
Elm Street Ventures is a seed and early-stage venture fund which includes Yale University as its largest investor. The firm focuses on the life sciences industry, with approximately 70 percent of its investments to date concentrated on companies developing therapeutics, laboratory tools, diagnostics, medical devices, and other health care-related products and services. However, Elm Street Ventures also active invests in software, materials, sustainable technology, and other industries. First investments are typically $500,000 to $1 million, with potential investments of up to $2.5 million more over multiple financing rounds.
One Fawcett Plaza, Greenwich, CT
Longitude Capital specializes in investments in transformative healthcare companies, including biotechnology, medical technology, and health solutions companies that seek to improve clinical outcomes, enhance the quality of life, and/or reduce system costs. The firm provides support to a diverse portfolio of both startups and growth equity companies.
680 Washington Blvd, 10th Floor, Stamford, CT
Galen Partners exclusively invests in the healthcare industry, including healthcare IT, healthcare services, medical technology, outsourcing and distribution, and specialty products. The firm focuses on companies that have the ability to improve healthcare outcomes, lower costs, or both. Investments are targeted at growth equity companies, with investments of $10 million to $30 million.