Investors who fund game-changing companies like Uber and Airbnb come from a number of different places, but one thing is for certain: they are not all looking for the same things.
In this blog post, I’m going to introduce you to the three types of investors who might fund your company, and provide you with an overview on how to make the most out of these investors. You’ll be able to take better advantage of them if they’re interested in your idea’s potential impact or if they just need financial compensation.
The three types of investors:
(1) my personal favorite type…angel investor(s)
(2) business angel investor(s)
(3) venture capitalist(s).
You can read more about the terms that are commonly used for these three types of investors here.
(1) Only one source of capital
If you’re looking for funds from an angel investor and your idea has a big impact on the world, they might just be able to bring in more money than your average venture capitalist. If you’re looking for funds from a business angel investor and have some significant traction with your idea, they might be able to bring in more money than a venture capitalist partner. But remember that if you don’t have any traction with your project, a venture capitalist partner will most likely not fund it. However, if your idea has the capability to create massive impact on the world and you’re looking for funding from a venture capitalist and have some significant traction with your idea, they will most likely be able to bring in more money that a business angel investor.
(2) Direct access to the funders
As a startup founder or entrepreneur, it’s easy to get caught up in having people in mind who you think could potentially fund you. This is great when you first get started just after graduating from college. But as you build up your company, these types of people may no longer be interested once you’ve gotten funding from other investors (i.e., angels or VCs). So it’s important to understand the types of investors you’re looking for, as well as the type of funding that they may bring to your company.
(3) A new way to think about funding
A venture capitalist partner will only fund companies with large impact potential. If you have a really big idea and have significantly traction, then they will make sure that those goals are met before they fund your company. Unlike conventional business practice, where funding is usually divided equally amongst founding team members, in the early stages of a company’s life a venture capitalist partner may not be interested in equity ownership. Instead, they want to fix what they perceive is a big problem with your idea and make it a reality. They want to see that your product is working, that you have traction (lots of customers), and that you’re making progress towards your goals. If they can see this, then they’ll be compelled to invest in you and your company.
