Getting an investor to back up one’s pet project is a dream for entrepreneurs and innovators. The process of inviting and obtaining funding from private players is quite well set now, and anyone with a new and promising idea can expect to find some investor willing to take risk.
The seed capital that a business needs to begin sprouting forth can be derived from personal wealth or from family or friends. Pre-seed capital too is available for new ventures, and there are no expectations of returns at this stage. Bootstrapping, asking one’s network or finding an investor for seed capital, these are the ways a new business can set up its first office.
Angel investors are among the first line of investors who are willing to take a risk and launch new ideas. These are private players, often past entrepreneurs who have themselves launched and run successful businesses. The investment from angels comes with expectations of returns, and the period of investment may last a few years. Angel investors are different from conventional loans in that they take a stake and also participate in giving directions to the business.
Venture capitalists or funds have become a popular way to give new wings to promising enterprises. Venture funding happens in a series of rounds rather than one go, and each round has its own set of qualifying criteria and expectations. VC funding means that a business has succeeded in gaining traction and customer trust, and is ready for scaling up operations. Venture funding series are represented by letters A, B, C and so on.
Other than angel and venture funding, a business can also look around and get a business line of credit. This avenue ensures that funding can be obtained anytime up to a certain limit.