What Are Investors?
Investors are people who put money towards a product or entity with the expectation of generating a larger benefit or financial return in the future. Additionally, investing is a long term practice. Those involved tend to take a smaller risk for a larger gain. Investors are a great option because many of them look to invest in small businesses. A positive gain, this aids your business to move forwards not only financially, but also economically. Not everyone who throws money your way is an ideal investor. Even though it may be tempting, it’s important to read the fine print before accepting any investment. The perfect startup investor offers more than just money. Meeting any type of investor is intimidating. Sometimes, even the slightest fumble in your pitch can cause them to doubt the future of your startup. Luckily, with the perfection prepared business plan, you’ll have an organized breakdown of your business model, structure, and execution. The best things to consider when pursuing an investor are:
Expertise– What is your investor’s background? If they weren’t investors would you consider hiring them? An investor who can offer skilled expertise applicable to your startup is more valuable than any blank check.
Network– Maybe your investor isn’t offering the oftiest amount of cash, but do they make up for it in who they know? Many times, who you know can make you an authority in your market quicker than anything else.
Resources– When possible, pursue industry veterans who have the resources you need at their fingertips. If they really believe in you, they’ll be glad to share.
There are a few different types of investors: passive investors & active investors.
Passive Investing: a safer method of investing. This is more of a buy-and-hold tactic which limits the amount of turnover by following the index.
Active Investing: riskier method of investing. Involves a constant buying/selling strategy.
Investors can either invest under their own personal account (retail investors), or those who invest in a start-up (angel investors), or those who invest in private companies. Individuals can also become investors themselves by building a portfolio and having sufficient funding to have the ability to invest in an individual, or a business entity.
This is a rough draft of some of the documents needed. Typically, it varies from lender to lender.