Four types of private investors for startups and what you should know about each of them
Investors can be sought-after during virtually any stage of a company’s lifestyle. Below you’ll find four common types of investors, along with suggestions for when you might consider them.
Commercial Lenders
Think “banks.”
These types of “investors” really don’t want equity. They just want paid back, with interest. They’re among the most conservative of investors. In fact, they’re most likely to make loans to businesses with plenty of other options for financing.
Banks may also demand collateral, verified revenue and income, or even co-signers before making any loan at all. For these reasons, banks are often a good choice for late-stage, successful, well-established businesses.
Personal Investors
Start-ups and young entrepreneurs often seek help from family members, friends, or any number of other personal investors to get a business started. These investors often provide small amounts of capital, known as “seed money.” Typically, these investors provide just enough to help a business get off the ground.
While these types of investors — who are often family members, friends, or close acquaintances — are often well-meaning and easy to attract, we recommend documenting their investments and treating them formally and seriously, so that everyone knows what to expect when businesses succeed.
Angel Investors
Often confused with venture capitalists, these investors are more likely to be high-income, high-wealth, or high-net-worth individuals. Angel investors are available across a wide array of industries. They’re useful for entrepreneurs or start-ups that have crossed the “seed capital” stage of their business lifecycles — but who might not have the revenue or success necessary to attract venture capital firms.
Venture Capitalists
Venture capitalists are often useful once a business begins to show significant or reliable revenue. These are private equity investors that provide capital to companies with high-growth potential. In addition to risking cash, they often provide technical, managerial, or other expertise to help businesses grow.
If you operate a firm with enough of a track record, a venture capitalist might be the right kind of investor for you.
Elvisridge Capital seeks established, privately held, middle- to late-stage businesses based in the United States. We invest in situations where our experience and resources can help generate significant profitability improvement and revenue growth. To begin a conversation, contact us at info@elvisridgecapital.com.
