Once you have a business idea, you will need money to make it a reality. In the early days of a start-up, the biggest concern for an entrepreneur is financing their big idea. As the market has grown, so have funding options. Five different investors will finance your idea.
Here we will talk about who they are and how they are different from others.
1. Friends and Family
When looking for investment, look no further than your immediate social circle, your friends and your family. These people are more interested in investing in you, rather than the idea. This makes it easier to get initial funding.
If you can secure funding from them, other investors are more likely to fund you as well. This is because they will be more convinced seeing that other people see your idea as investment-worthy.
2. Angel Investors
You should approach professional angel investors once you have reached the seed round. In comparison to Venture Capitalists, Angel Investors are more flexible in their terms and can be an excellent source of financing.
The best way to approach angel investors is being introduced by other start-up founders, at live pitch events, or directly online.
3. Venture Capitalists
For start-ups, Venture Capitalists are possibly the best investors. They provide you with the biggest checks and gain you traction in terms of visibility and credibility. If you have a VC backing you, consider yourself lucky.
VC firms have, as of late, started participating in funding rounds. What you need to be paying attention to, however, is the location of the VC firm, how soon they could release the funds, interests, and expertise, and how are exiting founders treated by them.
4. Accelerators and Incubators
As the names suggest, the primary purpose of accelerators or incubators is to give your idea the boost it needs. Google has an incubator which is quite popular. If you manage to get chosen for one of these programs, you can get funding from $10,000 to as high as $120,000. It is enough money to work on your idea, gain traction, interact with others, and build on your understanding of the industry.
Getting into an incubator can also open up your chances of attracting other investors. All you need to succeed here is a hustling mind-set as the purpose is to speed into the next stage of your start-up.
While a bank is not an investor in its real sense, it can still be a great source of your business’ capital in terms of loan. However, banks require proof of collateral for business loan making it not so great source of capital for start-ups in their initial phases. However, as the business grows, banks will start getting interests in your work.
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