There are many different types of investors, each with their own resources, skills, and goals. And depending on the plan, the demand for finance, and the size of the company, you might prefer one type of investor over another. Additionally, the preferences of the company will evolve with time, as will the company’s development.
Investors are one of the key participants in the company’s process, and their quantity and quality of participation will decide the success or failure of the enterprise. Because of this, it’s crucial to understand everything there is to know about the various investor types so that you can make the best decision and contact the proper investor.
There are four main kinds of investors for startups which include:
· Personal Investors
· Angel Investors
· Venture Capitalist
· Others (Peer-to-Peer lending)
The money received from these kinds of investors is typically used by the business to modernize its resources and machinery, expand its operations, or launch a new product. However, each circumstance is unique, therefore businesses should always exercise prudence when reaching out to investors.
The majority of business entrepreneurs rely on their close friends, family, or acquaintances to invest in their company, usually in the beginning. There is a cap on how much money these so-called «personal investors» can put into your business, despite the fact that they can help with funding.
Although it is often simpler to persuade a family member to assist you, there is extensive documentation that is needed, and they may be taxed for their assistance as well. As a result, if you decide to enlist the aid of a personal investor, be sure to consult a lawyer to help you avoid any issues.
Angel investors are those who invest in emerging businesses or tiny companies. Most people have probably heard of this most well-known category of investors. An angel investor may even be a friend or family member of the startup founder.
Angel investment typically takes the form of either one-time money to help a firm take off or ongoing support to help the business grow throughout its early stages. Compared to other types of investors, angel investors typically provide significantly more favorable conditions. The reason is that angel investors support entrepreneurs starting businesses rather than the profitability of the business itself.
In other words, angel investors are always more concerned with assisting businesses in their early phases of growth than they are with making a profit. Actually, there are several other names for angel investors, including business angels, seed investors, private investors, angel funders, and information investors.