If you have a new idea, you don’t need millions to bring it to life. A good business model can be profitable even with a little Startup Capital.
In the beginning, you need to make a business plan. Without a business plan, it will be difficult to plan costs and impossible to get a loan or attract investors. The development of a business plan does not require large investments. It is recommended to write down all expense items, and determine the projected payback and risks that may slow down the process of reaching a net profit. Attracting a private investor is associated with obtaining finance for the development of the project, each stage of which is fixed in the business plan.
Most fledgling companies are afraid to use their capital. Often, investments are needed at the initial stages of project development. At the moment when they are directed to the development of a prototype or the launch of the first sales. Banks refuse to lend to businesses with increased uncertainty and risk. In rare cases, banks do so for the security of personal property. The synergy of a promising business idea and finance can grow into a profitable project. All you have to do is to find an investor. The conditions for obtaining funds and support depend on the type of investor and his requirements. It is worth preparing for the fact that investors will vet the entrepreneur, so there must be no outstanding loans, no problems with the law, and no negative reputation.
How to get funding for a business investor funding for startups
To search for funding effectively, it is important to remember that each investor usually specializes in particular industries and stages of company development. Therefore, you should focus your efforts on those investors who are interested in your project.
You have to decide which type of financing is right for you. Equity financing is an investment in exchange for a stake in a companyIt makes the investor a full co-owner of the business and allows him to influence the management of the enterprise and receive dividends.
Sharing a share of the business with an investor is not a bad option. Ideally, if, in addition to money, the investor also brings his experience and connections to the project.
Investors for business startups
Oskar Hartmann’s family investment company invests in a developing business or a startup, the success of which is not known yet. Hartmann Holdings’ main focus is on building new ventures.
With a team of experienced entrepreneurs, they look for international opportunities for value creation. Hartmann Holdings identifies market opportunities and builds successful businesses.
The main difference between such investments and conventional ones lies in the potential of the project. If the risky enterprise finds the right business model to scale. It can become a major market player, and investors are waiting for profits, sometimes thousands of times greater than the investment. In the case of ordinary investments, the investor counts on a stable, but not super-high income. The risks of such a venture capital, as a rule, are much lower. The average rate of return on venture capital investments is 14.34% per annum over the last ten years and 34.43% per annum over 25 years.
Venture capital also benefits from equity financing. If successful, they can earn super profits that can be measured in thousands of percent of the money invested.
Types of funding for startups
The main advantage of venture capital investment is the high and rapid rate of return. Its level can far exceed the amount invested within the first few years. The average duration of an investor’s involvement in a project is about five years.
The venture capital sector is actively growing. Venture capital is an important tool for attracting investments. Many startups count on it.
The expectations of venture capital investors from investments can be characterized by the words ― the more the better, but of course, everyone understands that there are peculiarities of the market.
Investments in private companies are the most important part of the renewal of the stock market on the way to the New Economy. It is a kind of transition bridge that allows a successful startup to become a giant company. If investors make informed decisions to form a portfolio, they get a huge benefit themselves. Venture capital projects can either go completely broke or skyrocket, making their investors wake up famous. Venture capitalists benefit from equity financing: if successful, they can earn super profits, which can be measured in thousands of percent of the invested funds.
Businesses need investment all the time. The profit of venture capital from investors is received when the company grows in value and is bought by a larger investor. The second option is that the company enters the open market through an IPO. In this case, the investor may carry out the first public sale of shares. In this case, an unlimited number of persons may buy the shares.
Usually, successful entrepreneurs who have reached the ceiling in their business development and cannot afford to buy competitors from related segments go for venture capital investments. Also, when the business is traditional, it is impossible to scale it abroad. Then entrepreneurs turn their attention to venture capital projects.
A striking example of development is Apple. It started in the garage of one of its founders, Steve Jobs, but then received funding from a business angel and achieved success. Business angels are private investors who are willing to invest in startups at the earliest stages, taking an active part in the development of the business. Despite the enormous risks, business angels still expect to profit from their investments, which distinguishes them from philanthropists. They can invest either individually or as part of a syndicate.
Business angels, on the other hand, can invest on their own and can choose a startup capital at their discretion and set their terms. This is an advantage for the company because relations with private investors are more flexible than with venture capitalists with their own set of rules and rigid conditions.
There are also hybrid forms of financing, such as convertible loans. Investors give the lender the right to receive a predetermined stake in the company after a specified period. This form of investment is common in Silicon Valley.
The path of each business is different. It is determined by the experience and capabilities of the founders, the team, a million accidents, and the choices made. Remember that an investor is just as interested in finding a promising business as a startup is in attracting investment. So if you are confident in your product, feel free to get to know it and tell investors about it.
