Cash flow and the right investment are two issues that concern most entrepreneurs looking to start or expand their business. As a business owner it is important that you know the different types of investments that are available to you and also choose the right one for your business. Investor Types range from those that offer you monetary benefits as experienced investor can also mentor and help guide your business to the next level. In this post, we will examine the different investor types so that you can pursue and engage with the ones that make the most sense for the success of your business:
- Personal Investors: Friends and family are normally our first source of investment when we start something new. They offer us the opportunity to grow while giving our businesses the support needed when starting up. They become long term loyal supporters of the businesses they support but it is important that they enjoy the rights that any investor expects- a return on their investment. It is also extremely important that you enter into a written contract with them to formalise the agreement so that the terms of the investment are clear for you as well as they are. While some might advise against mixing your business and personal relationships, remember if done the right way your network of friends and family can be your business a unique advantage.
- Crowd-sourcing: Increasingly, more and more startups look online to get the funds to get their businesses off the ground. These types of investors are less interested in the returns but rather are looking to support a brilliant idea or innovation. While crowdsourcing will also tap into your pool of personal investors discussed above, as the name suggests there will be many more people supporting you with smaller amounts rather than one or two individuals. Once you have received funds from a crowd sourcing initiative, be sure to thank your supporters and keep them abreast of the updates in your business. This will make them feel involved and they could become ambassadors for your business, letting others know about your products or services through word of mouth.
- Angel Investors: Angel investors can be the right fit for your business when it is looking to grow. Angel Investors typically have huge resources and make it a point to invest in ventures that may find it hard to raise funds through other methods. Angel Investors are often on the lookout for that one great idea and a scalable business around that innovation. Depending on the investor, you could form an agreement to share a fixed percentage on his or her investments in the future or you could transfer a percentage of your business to them. This transfer of a percentage of ownership will give you a long term partner who can be an invaluable resource to charting the future of your startup.
- Venture Capitalists: Venture Capitalist firms are often looking for startups to invest in. VCs primarily come into the picture when you have established your business and your proposition as a thought leader. VCs assess and invest in emerging businesses in exchange for a higher return on profits as well as a stake in how the business is run. While a VC may have little interest in the day to day functioning of your business, he or she will be able to assist you in creating business forecasts and projections to further increase the profitability of your business.
Once you have explored the different types of investors listed above, it is time for you to weigh your options and partner with the one that makes the most sense for the success of your business.