Understanding Startup Investments And Funding

July 23, 2020

investments

Funding and investment are imperative for startups. If a startup wants to grow and become a strong company, then it needs important investments as it helps the entrepreneurs to cover the costs along with financing the growth of the startup. Without investments, a startup cannot have sustainable growth.

Types Of Investors

In order to find important investments, one must first understand the types of investors. In his article for Forbes, Alejandro Cremades states that there are 8 types of investors: Friends & Family, Banks & Government Agencies, Angel Investors, Angel Groups, Accelerators & Incubators, Family Offices, Venture Capital Firms, Corporate Investors1. Friends, family, and close contacts usually provide the necessary funding at the beginning. Such funding usually covers the costs. It is usually not intended to finance the growth of the startup. Bank and government agencies are not true investors, but they support startups with certain types of aids such as loans and grants. Angel investors and groups are individuals or groups who invest and provide capital for startups at the very initial steps. As early startups are sometimes risky to invest in, angel investors and groups are usually crucial for entrepreneurs. 

Accelerators literally “accelerate” the growth of a startup. If an entrepreneur is accepted into such a program, they receive huge investments while sometimes getting assistance from experts and resources. Family offices are private wealth management companies that handle investments. Venture capital is another type of financing for startups that have long-term growth potential, and Venture Capitalists usually get equity in the startup. Finally, corporate investors are companies that invest in the startup; they also acquire shares of the companies. 

How To Get Investments

There is no definite method of getting investments. To get investments, you must be a true entrepreneur that looks for opportunities. There are many types of investors, and each of these investors are suitable for startups in different stages. Thus, you must consider which type of investments would be most useful and benefit you the most. An entrepreneur must look out for programs or startup competitions that give investments. Furthermore, an entrepreneur should network and pitch the startup in appropriate environments.  

You can read a more detailed article about startups via this link

1https://www.forbes.com/sites/alejandrocremades/2019/01/02/8-types-of-investors-for-startups/#3ea41d1d4a3e

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