Obtaining startup funding for your company is not easy task, but it’s not impossible to secure funding for your company growth. There are constant announcements and daily hype surrounding startups getting funding and with all the news about the rise in the types of investors, there are many new ways for companies to find funding.
For many entrepreneurs who are entering into the business for the first time, expect to spend about 4 to 6 months to raise the necessary startup funds. The main reason behind this is that not everyone knows everything about funding off the bat, and the different types of investors and startup funding.
Most startup owners depend on investors for funding in their new business. It doesn’t matter if the company is introducing a new product, conducting an upgrade on equipment, or expanding operations, the investor’s capital can offer tremendous support for the company.
Even though there are many stories about people who fund their own startups by utilizing bootstrapping and putting all their earnings and wealth into a business, this approach is many-a-times too difficult and unrealistic for many starting off. It is normal for budding startups to seek the help of investors that would help them give a proper base to their project and plan.
There are 4 main kinds of investors for startups which include:
Crowdfunding (Peer-to-Peer lending)
Most business owners usually depend on their close acquaintances, friends or family to help them by investing in their business, normally during the initial stages. These types of investors are called personal investors, and even though they can assist with funding, there is a limit to how much they can invest in your company. It is often easier to convince a loved one to help you out, but there is heavy documentation that is required for which they can be taxed for helping as well. So, if you are going to take a personal investor’s help, ensure that you consult a lawyer to help you avoid any complications.
Angel investors are those who put their money in small startups or new entrepreneurs. This is the most famous type of investors that most people may have heard about before. An angel investor might even be close to the startup owner, like friends or family. Angel investment is normally either a one-time off funding for the business to propel, or an on-going investment to support and take the company ahead in the initial stages. Angel investors usually offer much more favorable terms as compared to the other type of investors. The reason is that angel investors invest in the entrepreneur opening a business, and not the viability of the company. In short, angel investors are always focused on helping the startups to grow in the initial stages instead of obtaining a profit from it. As a matter of fact, angel investors are also referred to as business angels, seed investors, private investors, angel funders, or information investors.
A venture capitalist (VC) is an investor who offers capital to the startups that are believed to have long-term growth potential. Venture capitalists are normally investment banks, well-off investors, and any other financial institutions. Even though this is a risky way for investors to put in their funds, a successful payoff is worth it. A VC would put their resources into a company that they feel has the possibility to grow, and in return, they would demand equity in the company and get an overall say in the company’s decisions. Since entrepreneurs get both open funding as well as the advice of an experienced and knowledgeable person, many tend to choose these type of investors. In a VC deal, large chunks of the ownership of the business are produced and sold to some investors via independent limited partnerships which have been built by venture capital firms. At times, these partnerships are made up of a pool of various similar enterprises. An essential difference between the other equity deals and the venture capital deals is that VC deals normally focus more on growing companies that are looking for an abundance of funds for the first time. So, if you want a lot of money for your startup, along with some long term experience and knowledge, this option is a good one.
CROWDFUNDING (PEER-TO-PEER LENDERS)
Peer-to-peer lenders are groups or individuals who provide capital to small business owners. But to obtain this capital from these type of investors, the owners would need to apply with companies that offer peer-to-peer lending, like the Kiva, Prosper or Indiegogo. As soon as the owner’s application gets approved by the company, your peers would then determine if the company is right for their investment or not. CASH@HAND offers services that help you get your campaign start and grow, simply Contact Us at email@example.com
LOOK AT YOUR NETWORKS
It doesn’t matter which type of investors you choose, each one of them are looking for ways to reduce their risks while lending cash to startups. And this means that they would have more interest in you if they know you or if you have been highly recommended. Hence, it is better to use your networks to gather all the potential connections with the investors available, and then you can consider the right investor for you and your company. When you have decided this, you can ask the person who knows the both of you to make an introduction.
How do I get Introduced to Investors?
People often say it’s not what you know, but who you know, and the same is true for obtaining the right type of investors. Investors tend to listen to other investors or the news about a new product that might get high market value. Make friends with owners in your market and ask them to help you connect with the right type of investors. Just make sure the entrepreneur is inline with your business objectives and goals. Request early investors to introduce you to the other type of investors if you have already got the initial funding. This would help you build long term relationships. This is one of the biggest steps in the funding industry and can help you for a long-term.