Morne Patterson – Potential Investors For a Startup

Starting a business can be a challenging and risky endeavor, and often requires third party funding assistance which can also mitigate some of that risk. There are a variety of potential investors that a startup may consider approaching, each with their own unique set of characteristics and considerations.

 

Your suitable investor

When looking for investors who have a track record of investing in startups, be sure to understand both their investment horizon and their general investment approach. Certain investors want to be actively involved in the day-to-day operations of a business, while other investors want to be less involved but require onerous reporting and governance. When seeking your ideal investor, keep these points in mind. Even so, it’s always useful to seek investors with expertise in your industry, as they will be able to offer strategic guidance and insights.

 

Types of investors for startups

Angel investors: These are high net worth individuals who invest their own money in startups, in exchange for equity. They are typically looking for a high-risk/high-reward investment opportunity. Angel investors are typically not involved in the day-to-day operations of the business.

 

Venture capital firms: A venture capital (VC) firm trades equity in favour of funding to early-stage and growing companies. VCs typically invest in high-risk, high-reward companies and often look to make larger investments. The capital in VC firms is usually assembled from institutional investors, high net worth individuals, and sometimes the firm's own partners. They make investments in a diverse portfolio of companies in the hope that some of these investments will yield big returns. VCs generally have strict reporting requirements. They participate in the companies they invest in, offering both financial resources and strategic advice as well as access to an industry network.

 

Crowdfunding platforms: Crowdfunding is a method for startups to raise small amounts of money from many people, typically through an online platform. Rather than equity, investors often receive a financial reward in exchange for their investment. Risk appetite from these investors vary, who are also generally less involved.

 

Strategic investors: These investors are interested in a particular startup because they believe it aligns with their own business goals or strategies. For example, they may be looking to gain access to a new technology or customer base. Strategic investors often assume a majority stake, or eventually take on the startup’s asset base.

 

Family offices: These firms are employed by a wealthy family to manage their investment portfolio. Family offices have a varied risk appetite and may be more patient with their investment period than other investors.

 

Where to Find Your Ideal Investor

Start out by leveraging your personal as well as professional network. Find contacts and advisors in your industry who can be valuable resources in finding an investor. Ask for introductions or referrals to investors who might be interested in your startup.

 

Attend startup events, pitch competitions, and meetups to meet potential investors and other entrepreneurs. Building connections and making connections can often lead to funding opportunities.

 

Alternatively, there are many online resources, such as AngelList and Seedrs, that can help you find potential investors for your startup. These platforms often have detailed profiles of investors, including their investment preferences and contact information.

 

Conclusion

Finding the right investor for your startup can be the difference between success and failure. Follow these steps above and increase your chances of identifying the suitable investment partner for your startup.