MicroVentures: MicroFinancing For Business Startups

by Silicon Valley Blogger on 2010-11-297

How would you fund your business or finance a start up for optimal growth?

In today’s economy, getting a loan is tough. Fewer banks than ever before are loaning money for things like cars, houses, or other personal expenses. And small start-up businesses are even less likely to find capital. So, what are small businesses supposed to do when they need capital to buy machinery or raw materials or to hire new employees?

While some of them may go to banks to get the necessary financing, some others may want to consider a new way of borrowing. A new approach that’s picking up steam is peer to peer lending. And while I’ve discussed this form of lending and borrowing in the past, which you can see in my review of Lending Club and coverage of Prosper (both well known players in this space), I’ve recently come across a new peer to peer networking site which supports small businesses called MicroVentures.com.

business peer to peer financing

MicroVentures: MicroFinancing For Business Startups

Peer to peer lending has gained ground in the world of personal and small business lending. As a matter of fact, this segment of the lending industry is actually scheduled to reach $1 billion in transactions in the next two years. What differentiates MicroVentures from the other microfinancing and p2p networks is its focus on business ventures. MicroVentures seeks to unite start up businesses with venture capitalists, also known as angel investors in such a way that the investor has the opportunity to invest in new startups while allowing small businesses to have access to the funds they need in order to grow. As a small business owner myself, it’s something I can appreciate.

MicroVentures, peer to peer financing

Here’s how it works:

  1. Small businesses interested in raising capital will pay a $100 fee and submit an application along with a copy of a business plan to MicroVentures Marketplace.
  2. MicroVentures will review the plan and assess the company’s vision and potential. If your business plan passes the preliminary review, you will be invited to complete phase two of the application process.
  3. During the second stage, an additional $250 fee will be required so that your company can be scrutinized further. Your company’s viability will be assessed by the Due Diligence team at MicroVentures.com. Areas of this review will include:
    • a break even analysis
    • use of credit
    • burn rate
    • use of cash
    • industry risks
    • management resumes
    • outstanding liabilities
    • investment activities of founders
    • past or pending litigation
    • current assets
    • other areas that may present themselves as relevant to the review
  4. If the company satisfactorily meets the guidelines set forth by MicroVentures, the opportunity will be listed on the site and potential Angel Investors will be able to invest money in the company.
  5. In exchange for funding, the principals must be willing to give up an equity stake in the company, which will be represented by shares that individual investors can purchase.

Currently, MicroVentures is reviewing opportunities in the following areas:

  • Biotechnology
  • Business Products and Services
  • Computers and Peripherals
  • Consumer Products and Services
  • Education
  • Environment
  • Electronics
  • Financial Services
  • Healthcare Services
  • Internet Technology
  • IT Services
  • Media and Entertainment
  • Medical Devices and Equipment
  • Other
  • Retail/Distribution
  • Semiconductors
  • Software
  • Telecommunications

In the event your project is funded, you will receive these funds in approximately two weeks from the time the deal closes. You will be required to submit an updated status to your investors every six months. Once your investors have purchased shares in your company, they are not under any obligation to sell them back to you. Investors will also be required to hold their shares for 1 year after which they have the option of selling it to others. Returns on investment are usually achieved through a liquidity event such as a company sale, merger, IPO or sale to other investors.

So, the next time your company finds itself in need of an angel investor, you may want to check out MicroVentures as a possible source of funding. There are no guarantees, of course, but they’re certainly a nice option to keep in mind when you’re ready to fund your project. And if you’re interested in becoming an investor in this network, bear in mind that there are risks involved in this type of platform. In fact, the risks here may be higher than with conventional investments as you are investing in ventures that may not have track records to speak of. But if you’d like to apply your money outside of the norm and are willing to take the additional financial risk, then MicroVentures.com might be an excellent website to visit.

For more information about MicroVentures or venture capital peer to peer investing, please visit MicroVentures.com. You can also read more about them in this write up at Entrepreneur.com.

This review does not constitute a recommendation, but rather, a way to give some interesting and emerging ideas some exposure. So do your due diligence!

Copyright © 2010 The Digerati Life. All Rights Reserved.

{ 5 comments… read them below or add one }

Bea Patrick November 30, 2010 at 2:19 am

Peer to peer (P2P) lending represents a new and potentially disruptive force in consumer lending and investment.

Silicon Valley Blogger November 30, 2010 at 11:24 am

I don’t see P2P bringing down the status quo. I think it’s a new method of doing financing and investing but I don’t believe it will replace or do that much damage to the banking industry. Or if so, it will take a while before it happens. I believe that it provides a great new option for borrowers and would-be lenders/investors, but I doubt it is ready to supplant the traditional, established arrangements and products/services offered by our banks and financial institutions.

Consumermiser December 3, 2010 at 11:14 am


Once again you have shared some information that at least I think is cutting edge. I will check out MicroVentures as I have several business ideas and I know others who have some great ideas as well that need to go from the idea stage eventually to the funding stage. With traditional lending drying up, this alternative method makes funding more accessible for the average person.

Silicon Valley Blogger December 3, 2010 at 11:27 am

Thanks! In my Twitter channel, I mentioned yesterday how it seems like the economy is recovering and more investments are being applied into business. I am feeling a resurgence of the startup trend as I am receiving many interesting leads on companies offering new services and products. VC seems to be alive and well! Do stay tuned for more coverage of interesting companies of this sort down the road. 🙂

I don’t always endorse companies, products or services here, but what I do is afford exposure of these sites and ideas. I would love for people to dissect the idea/product/service and give their thoughts on these. I love the idea of providing these companies a platform for discussion. If we can offer feedback and questions, we can learn a lot about their solutions to existing problems, and whether they can be effective.

I am excited to be able to use my site as a way to afford that type of discussion, especially for new companies in the financial or business arena (in the future, I’ll see if I can also cover retail).

Gary C. Bizzo January 6, 2011 at 7:30 pm

Great article, In Vancouver I manage clients who use Peer Lending with a local credit union. Three or more get together, have a leader and must show each other their credit report. The group at that point decides if they want to take a risk with the others because if one defaults the others are ‘morally’ responsible and can’t access any more two or three tier funds until the debt is clear.

We also have clients using micro loans to $35k with added credit card and LC’s. I manage another micro hybrid that is for entrepreneurs under 34.

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