HOW START UP
CAN EASILY RAISE FUND
FOR THEIR BUSINESSES
Episode 3- Different Types of Private Investors
The last two episodes
introduced private investors. In this episode i will give detailed information
on different types of private investors. Just spare some few minutes with in depth attention.
Before you start your hunt for a private investor, you must be
aware of the different types of private investors that you may come across. So,
without further ado, here are the different types of private investors that may
be willing to invest in your startup:
1. Friends and family:
Startups and small businesses often turn to friends and family
as their first private investors. They are a great source of investment because
friends and family already have the trust and confidence in you that are
required to take the risk of investing in a startup. Friends and family can
either lend money to your new business or make an equity investment.
When it comes to money, don't take the investors lightly just because they are
your family and friends. Remember that your investors will only get paid back
if the business makes money. Give them a good pitch, show them your business
plan, and make sure they understand the risks of investing their money, even if
they trust you completely, in order to avoid ruining your relationships.
2.
Angel Investors
These are wealthy individual investors who
put their own money into new businesses when they are at the startup phase.
Angel investors sometimes put their money by joining forces with other angel
investors. This is called an angel group, and it can bring a more significant
amount of money to a startup.
Angel investors should be "accredited investors". Accredited
investors have a net worth of at least $1 million. In addition, they earn
$200,000 a year or $300,000 a year with their spouse. Along with money, they
also offer mentoring or advice that makes them more valuable for your business.
\3.
Private Equity Investors
Private equity is money that is put in by private individuals
and private equity firms. In exchange for their money, private equity investors
get a piece of the business or a loan note. The goal of a private equity
investor is to make money by selling their share of the business after a few
years.
While you can get private equity from individuals, this type of investment
usually comes from private equity firms, which are investment companies that
take money from individual investors and pool it to invest it in companies that
have already shown great promise.
4.
Private Investors Versus Venture Capitalists
Venture capitalists are professional investors. Venture capital
firms have people who put money into the venture capital firm, and the firm has
to give them big returns for their money. Because of this, what they look for
in an investment may be different from what other investors look for.
They assess businesses and invest in them the same way people invest in stocks,
and they do everything they can to make sure their investment brings a return.
VC firms put more money into growing a business in exchange for a share of it
than you’d expect from an angel or other individual.
Remember, pitch private investors such
as DESNET through desnet920@gmail.com or facebook/desnetsesnet or facebook/desnetfunding for your business
funding.
Typically venture capital
firms invest more at the later stages of a startup than private individuals.
There are some which specialize in early-stage startups. Though they are going
to be more demanding of you. Typically, they will come in after you’ve raised a
round or two from other individuals or sources. In the next episode, I shall bring the exposure of How
to Find a Private Investor for Your Startup
