Investors are the backbone of many startups and small businesses. Without investors, it is very difficult to get a business off the ground. Luckily for you, this post will give you all of the information that you need about investors in order to make smart decisions when choosing what type of investor to go after.
This article covers: What is an Investor? Different Types of Investors; How To Approach Investors; And More!
What Is An Investor?
Investors are people who provide capital to a business in exchange for ownership. Investors can be individuals, groups of individuals, or even public companies that pool their resources together to form an investment group.
Different Types Of Investors
Angel Investor: An angel investor is a high-net-worth individual with experience and knowledge about the startup industry who provides funding for small businesses.
Venture Capitalist: Venture capitalists are professional investors who work for investment firms, also known as VCs. They invest in startups and growing companies with the hope that they will grow exponentially into full-fledged corporations.
Corporate Investor: A corporate investor is a company that invests its own money to achieve financial objectives like increasing revenue, developing a new product or service, and more.
What Are Different Styles Of Investment?
There are many different styles of investment, but the most common ones include:
Series Seed Funding: Series seed funding is financing in which an investor acquires a minority equity position in exchange for capital. The money that is invested can be used to support research and development, marketing activities, or other aspects necessary for business growth.
Pre-Seed Funding: Pre-seed funding is financing that does not give the investor a substantial amount of equity in the company. Instead, they provide capital for the early stages and help with operational expenses like salaries and rent.
Seed Round Funding: Seed round funding is when an investor acquires shares or ownership interest at a relatively low valuation (low share price) in exchange for capital.
Seed-Stage Funding: Seed stage funding is the first round of financing after a startup has been formed and exists solely on paper, but before it’s ready to raise money from angel investors or venture capitalists (VCs). It can also be known as pre-seed funding.
Things To Consider Before Approaching An Investor?
Before you approach an investor, there are certain things that you should do first. These include:
– Make sure your business is a good fit for the type of investors that you want to go after;
– Make sure that your company has defined its mission and goals so they can be explained in one or two sentences;
– Ensure that you have a good understanding of your company’s cost structure and understand the value proposition.
How To Find An Investor?
There are certain steps to take when trying to find an investor for your business, including:
– Developing a pitch deck,
– Building connections with early-stage investors in your area,
– Attending networking events and meetings,
– Reaching out to investors with whom you already have a connection.
How To Approach Investors?
When approaching an investor for funding, you should be prepared with plenty of information about your business in order to get the conversation going. Depending on what type of investors that you are going after, there might be different things that they want to hear from you. For example, a venture capitalist might want to hear everything about your company’s business plan while an angel investor may be more interested in the product or service that you are going to provide.
Investors play a huge role in helping businesses get off the ground and become successful companies. It is important for entrepreneurs who are looking for funding to understand what different types of investors are looking for so that they can go after the right one.