So you have an amazing business idea with a foolproof chance of becoming successful. But, you don’t have the funds required to turn this idea into a reality. So what can you do? Well, you will require funding from an external source to convert the idea into an ideal business. But, who will fund your idea and why?
Are you an entrepreneur looking for funding but have no clue how to source it? Don’t worry. To help you out, we have provided a list of investors who can help provide the monetary assistance you may need.
1. Personal Investors
Company owners mostly count on family, friends, relatives, or close acquaintances to fund their businesses, particularly at the time of inception. Although it can be easier to ask dear ones to aid, appropriate paperwork is strongly recommended. It is necessary to create an investment agreement that lays out the investment scale, interest rate, ownership terms, and anything else that may form an essential part of the contract. Hire a business startup lawyer to make a well-detailed contract to stay clear of any issues in the future and prevent precious relationships from going sour in case any disputes arise.
2. Banks
Banks are not an investor, but they are traditionally a credible source of corporate loans. They need an applicant to explain his/her business plan, submit a business strategy, and then determine whether they are confident in offering financial support in the form of a loan. Loan-seekers are also demanded to provide evidence of collateral or income source for the loan to be sanctioned.
But banks are usually not an easy funding option for new start-ups and small firms. They provide credit cards, credit lines, and advance loans once your business accelerates.
3. Peer-to-Peer Lenders
Peer-to-peer creditors are people or associations who provide financial help to small business people. To make a deal with these investors, companies must appeal to experts in peer-to-peer lending and, once their applications are accepted, creditors decide upon a business they want to help.
4. Angel Investors
Angel investors are people with capital gains of more than $200,000 or with an annual income of more than $1 million. They are beneficial for business people who are past the initial funding phase but are not yet prepared to pursue venture capital. Startups can approach angel investors directly. They can do this online via emails or approach them at events and through introductions from mutual people.
An angel investor is the one who funds ventures that struggle to lure other types of investors miserably. An angel investor may claim a percentage of the return on his investment or negotiate for a share of the company’s ownership.
5. Venture Capitalists
A venture capitalist is an investment company that is usually interested in businesses that have already provided a record of returns. Venture capitalist organizations do not deal with speculative start-ups that may need just a modest amount of money to get started. Instead, Venture capitalist companies deal with the enterprise valued at several million dollars.
6. Accelerators and Incubators.
Accelerators & incubators support entrepreneurs in achieving growth by offering mentoring, guidance, and tools to help start-ups flourish. They might be active at all business growth levels and development, from the concept stage to the advanced stage of income generation. Many prefer to help at early phases since businesses usually gain the most from external support.
They also offer a Demo Day. It is a day to draw the start-up funding network’s interest in start-ups by creating many investment proposals. Here, you will be given a chance to pitch the most significant investors and be exposed to financing streams to aid you in massive business growth.
7. Corporate Investors
Large enterprises benefit hugely by investing in a start-up, or any other businesses they feel are worthy enough and have huge potentials. They usually help companies that can support their growth figures, reinvest assets, and find talent and technology, helping them escape the negative impact of industry shifts and fuel cash flows.
These investors may prove to be a brilliant asset in driving the company to the next level. But it can be very challenging to interact with them. Any collaboration or partnership on distribution platforms, processes, and customer bases must be dealt with cautiously with a great deal of patience.
Depending upon the type and amount of funding required, startup owners can approach and acquire funding from any of the above-mentioned sources. You can also look for and arrange funds from other sources if you know of any.