Raising capital is a step that every startup faces. When a business is brand new, the question of how to get money must be addressed. If you intend to launch a business that needs significant capital expenditure, such as a retail business or a company that employs several other people, then you won’t get far without initial funding. Every investor has pro’s and con’s, and it is best to know what ways will work best for your business.
Friends or family investors:
Going to friends or family members can be the first point of contact to raise capital for your business. Investments from family and friends usually come in the form of loans, which you can arrange to pay back. It’s important to ensure that documents such as a formal business plan and legal agreements are drawn up professionally and to be transparent about expectations surrounding the investment.
Angel investors refer to wealthy individuals who enjoy helping entrepreneurs in their business ventures. They can be important to a new startup, investing their money in exchange for small ownership of part of the business in an equity investment. However, they can also provide loan investments in the same way as family and friend investors.
One of the most popular forms of startup funding is through venture capital, who are wealthy investors that support small businesses and startups by providing them with capital to grow and expand. Unlike family or friend investors, venture capitalists are generally equity investors with the expectation of a stake in the business.