Seeking The Right Investor For Your Start Up

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New ideas for start ups usually face a long climb towards success. The first obstacle entrepreneurs need to face when starting a business is coming up with the capital to fund the venture. Most start ups usually depend on investors willing to put up the money to finance the project. Choosing the right investor to fund your business start up is just as important as being able to collect the needed amount to get things going. There are certain things an entrepreneur needs to consider when trying to seek the right investor. Here are just some of them.

Types Available: Angel Investor

When it comes to capitalization for a start up, there are three general types that entrepreneurs usually have to consider aside from the traditional sources. There are angel investors, venture capitalists, and crowdfunding. Angel investors are usually affluent investors willing to provide funds for a start up as a way to help out the entrepreneur. Although there might be an exchange of sorts for the provided investment such as equity stake on the company or a convertible debt, angel investors usually invest on the entrepreneur rather than the profitability of the start up. Angel investors are usually comprised of affluent family members or relatives willing to provide funds for the start up. They can also be private investors willing to put up to seed money for a project. Angel investors usually use their own money as funding for projects.

Venture Capitalist

Venture capitalists on the other hand are investors who provide financing resources to start ups usually in the form of a pooled money from other investors seeking out start ups. Venture capitalists provide funding as a way to take advantage of possible strong profits once the start up becomes successful. These investors also prefer to have a hand in managing the business, so they usually ask for a seat on the board as part of their investment.

Crowdfunding Sources

Crowdfunding is an informal type of funding composed mostly of money pooled together from future customers or supporters of a certain business idea or start up. It has become a very popular way of collecting funds from the people who are willing to support and encourage the start up. These investors either believe in the project or are interested in the business idea. Most successful crowdfunding  start ups usually have a new product or service to provide. Funding comes in the form of a pledge or in exchange for opportunities to receive new products first or to enjoy certain privileges.

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