Startup Investor: A Definitive Guide To Understand Investment Mindsets

 Learn about the risks and returns associated with different types of investments, tips for negotiating with investors, and legal considerations to keep in mind when seeking investment for your business.

When asking an investor to put money into your business in exchange for shares, the return on investment should be enticing enough for them to agree to the deal. However, what constitutes a fair percentage for an investor varies depending on the type of investment. In this article, we will examine what different investors are seeking and what kinds of offers may be appealing to them in return.

Investment Types

To better understand how investors contribute to your business, let's take a look at the different types of investments available:

Equity

Equity investment involves the exchange of money from an investor for partial ownership of a company, and can also take the form of an initial public offering (IPO). If you're looking for guidance on how to secure equity investments, consider seeking fundraising consulting services.

Debt Investment

Debt investment involves acquiring a significant amount of debt with the expectation of repayment with interest in order to invest in a company or project. Debt investment is less risky than equity investment because the investor is guaranteed a fair percentage.

Sources of Funding for Start-up Founders

A startup entrepreneur should be aware that their company may obtain funding from a variety of sources. We have highlighted some of them below:

Angel Investors

An angel investor is a high-net-worth individual, usually a close friend or family member, who provides financial support to small businesses or entrepreneurs in exchange for owning stock in the firm.

Venture Capitalists

A venture capitalist is a person or organization offering funding for a business's launch. Venture capitalists are often large companies that can manage greater risk and seek a more significant return on investment than standard investments. This is mostly done in exchange for stock. Click here to learn about the difference between an angel investor and venture capitalist.

Crowdfunding

A crowdfunding campaign solicits modest donations from a large number of individuals to collect money for a business or project. Crowdfunding works well on sites like Kickstarter, IndieGoGo, etc.

Bootstrapping

This describes the process of starting and expanding a business utilizing solely available resources, such as personal money, home computers, and garage space.

Seed Investment

During this stage of venture capital financing, a company attempts to obtain initial funding to pay for the development of its product and business strategy. Typically, seed money is provided by friends, relatives, and angel investors.

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