You don’t have to be rich to start a business, but you do need capital. Few entrepreneurs are lucky enough to have the amount of money needed to cover all of the expenses of a startup business. If you can’t bootstrap your business, you have to find a way to finance your business.
Private Equity investments are just that – private. They are made by either privately-owned companies or private individuals. While these investors will negotiate for a percentage of the company or profits, they very rarely take over control of the business.
Venture capital (VC) investments are often introduced when a company is beyond its idea stage. They fund startup companies that offer promising potential for large dividends. Venture capitalists usually come with business experience and can offer advice when navigating the entrepreneurial landscape. VCs are ready to invest millions into startups that promise quick growth potential. VCs take a percentage of your business and will – usually – want varying degrees of control over your business.
Angel Investments are similar to venture capital investments in that they offer financial help in return for a part of the business. Angel investors, however, are usually interested in more than just making money. Often retired and very wealthy, angel investors like to remain involved in their industries of choice and be active players in their communities.
Understand what kind of help you need and when you require an investment. Will you need capital to start your business or to help it expand? Make sure that you are comfortable with who you invest with and when.
Take the time to get to know your investors. Look beyond interest rates and percentages to ensure that your investor will be a good fit with your company. If possible, find someone that compliments your own skills. If you excel at marketing, but need help with design, try to find someone that can fill that need.
Don’t be afraid to do some research into a potential investor. Interviews between investors and founders go both ways: you both want to make sure it is a good fit. If possible, contact other startup founders who have worked with the same investor to see how their experience was.
Be prepared when going into an investor meeting. Avoid fluff. Stick to the facts. Have a clear business plan that includes your mission statement, detailed numbers, and plan for the future. If you can clearly articulate what you want for your business, it will allow investors to know if they meet your criteria. A well thought out, intriguing business pitch will allow you to connect with the right investor for your company.
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