Funding & Investors do not only refer to private investors. These can be from any source such as friends, relatives or networks and associations. But it is a common perception that angel investors are the only ones who can provide funding for start-ups. And this is completely wrong. There are several funding sources that an entrepreneur can tap depending on his requirements.
There are various angel investors’ groups in the market. However, if you want to work with these groups, then you should first know about them. Such groups generally have links with various venture capitalists. This means they can provide you with capital depending on your requirements. This is one of the easiest ways of getting money without having to go through the rigors of pitching your business case to potential investors.
Another source of funding & investors is’sponsor’s groups’. They are normally sourced from organizations or individuals who sponsor companies during their start up stage. They usually pay for the advertising and marketing costs incurred by the company during that time. Once the company starts to flourish, these sponsors’ groups sell off their stake in the company to willing buyers. They do not necessarily provide funding & investors. They may invest in the company later once it becomes successful.
Private equity firms can be another source of funding & investors. In the past, these firms were mostly sourced from major banks. However, now, many of the banks and other financial institutions are offering funding for start-up companies through third party investors’ groups.
The third most popular source of funding for companies is venture capitalists. Venture capitalists usually provide funding to start-ups in exchange for a percentage of the profits. They usually take a long term view while assessing the value of the business. If the valuation of the companies is high, then venture capitalists will likely provide funding. However, if the valuation of the companies is low, then most venture capitalists will not provide funding.
Private investors’ groups and government agencies are also a source of short term funding for companies. For start-ups, it is important to note that most of these investors’ groups are usually financial institutions with extensive capital capabilities. So, they usually require a good credit history and sound business plans. This does not, however, mean that they will fund any start-up company without a clear plan for how they will use the money. Most private funding sources require a detailed business plan with projected income and expenses. Also, before approaching investors, you should have a good idea about the type of return you expect for your investment.