A lot of fresh young entrepreneurs looking for capital haven’t heard of angel investors. Angel investors are wealthy people who pump in money or capital into your business venture, generally for starting a business. Of course, you can approach angel investors even if you are a seasoned businessman, in which case, you have probably heard all about them. Angel investors pump in capital in return for ownership equity or even convertible debt.
A Brief Overview
When an angel investor invests in your company, he becomes a part of your company and is not just another person who holds shares. The progress of your company becomes important to him because his money goes into making the company what it is. Angel investors don’t really exert too much control over your company. Moreover, the rates of interest charged by them are not too high either. What is more, they do not mind a slower return on their investment, compared to say, venture capital firms.
What are venture capital firms? This is yet another reliable source of funding for companies just starting out. But there is one condition; companies should approach venture capital firms only if they are confident in their abilities to produce a really high growth rate. Entrepreneurs should definitely not apply the policy of “once bitten, twice shy” when they approach venture capitalists.
A venture capital firm knows how to recognize a good idea and a solid selling technology when he sees one so don’t be afraid if your product or service is saleable. Venture capital is basically a technique of fund raising for companies which have no reservations about exchanging equity in their company for money or funding which will enable them to grow their business.
Venture capital investments can apply to all kinds of businesses – both technology and non technology based businesses. Like angel investors, you can also approach venture capital firms if you are a mature firm. This form of fund raising is not restricted merely to newbies. This is definitely a very viable source of funding and investment for your business, provided you have the ability to provide a good growth rate as mentioned before.
Venture capitalists demand a really, really high rate of interest (exceeding 20% per annum), but on the upside, the money provided will also be a large sum – the minimum interest is in the range of five hundred thousand dollars and it goes on to many millions. They also require a quick return on their investment, so, if you are confident of the ability of your business to take off, this is a really good source of funding for you.
What is more, after a temporary lapse, the venture capital market is now well on the way to recovery, so you need not worry about its reliability. One thing common between angel investors and venture capitalists is that they are on the lookout for capital growth and revenue increases so that they are able to recover the total sum of their investment over a period of time, if you are able to assure them of that, then there’s no stopping you!