Different Types of Business Investors
The idea of being your own boss is so exciting, but the point where this idea seems like crashing is when you think about money to kick start your startup. Unless you are born in a millionaire family, or you have served on a higher post for a multinational company, it is difficult to imagine that you would have enough money to see the dawn of your entrepreneurship. That’s why most startups lookout for investors to fulfil their funding requirements.
But finding an investor is also not as easy as you imagine. You will not get an investor just by pitching your idea. Moreover, considering that there are so many types of investors, picking the right one for you is also so confusing. But you can’t select an investor randomly because your selection of investor determines whether your venture will be a hit or flop.
Here are some types of investment you need to consider for receiving your funding:
Personal investors are people close to you, your friends, family members, or anyone in close acquaintances can turn into your personal investor. What can be better than getting a helping hand financially from your acquaintance? Most probably, all the policies and paperwork will be flexible here, but you need to consider a few things.
Personal investors might not be able to lend you a huge amount of money, and involving a personal relationship in the business can be risky. Consult a lawyer and go for detailed documentation of all matters to avoid the creation of any bad blood between you two.
Venture capitalists are people who look out startups for investment that seem to be promising and have a potential for tremendous growth. Usually, people with a lot of money, banks and other established financial institutes are venture capitalists. They know their investment can be a risky affair that is why they only invest in startups that have different business pitch and look different from their competitors. So, to approach a venture capitalist, you really need to have a firm idea.
A VC invests in the early stage and remains in the loop throughout the process, unlike private equity – that’s the main difference between venture capital and private equity. The venture capitalist asks for equity in return for the investment and holds a say in the company.
Angel investors are the most sought after type of investors in the world of startups because they invest in startups and small businesses for the sake of giving them boost. Due to their intention of wellness, they usually offer to fund on favourable terms and conditions. They are the best option for those who don’t want to see someone else dominating in their company, like in the case of the venture capitalist.
As you can see that there are diverse types of investors, you will encounter while looking out funding for your business. All these types have their own pros and cons. Make sure you consider all the dimensions before choosing your fighter because – the right selection of investor matters!
For Accounting Practice