Building a new business from the ground up requires many things, including sufficient funding. An entrepreneur may have the most amazing product or solution, but without the funds to bring it to life, the potential may never be realized.
Before launching into a fundraising exercise, entrepreneurs and business owners should understand the different types of investors they may wish to approach.
Investors and different business stages
A single round of fundraising rarely suffices for any business. Company executives should always prepare to go through multiple rounds of fundraising. These rounds may happen over the course of many years and may even lead up to an initial public offering, or an IPO. Prior to this stage, however, Forbes explains businesses may consider working with venture capitalists, but those may not be appropriate at the true start-up phase.
Angel investors for true start-ups
According to Entrepreneur magazine, angel investors may be an appropriate audience for a business just getting launched. However, not all angel investors are the same. Some may want to offer a sizeable amount of money that comes with the aspirations of one day owning the business. Other angel investors may offer relatively small amounts of money, signaling their relative lack of commitment to the business.
When seeking an investor who wishes to remain part of the business for the long-term, entrepreneurs should evaluate the investor’s prior activities and their relative staying power and ultimate outcomes. Having a diverse panel of investors may also prove useful to a business. Some investors also offer essential industry expertise or connections that may support a new venture’s success and growth.