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Uzone.id — If you’re a startup founder, finding the right investors is important to help your company grow and succeed. We usually hear about startups securing funding from many types of investors.
For your information, there’s more than one type of company investor to fundraise from. So, what’s the difference? Which may be a good match for your startup? Here’s a list of seven different types of investors you can reach out to for your company.
Non-Accredited Investors aka Friends and Family
Investors are not always from outside, they can be your family or your friends. They’re the first type of investor you should be approaching at the very beginning.
Most founders kick off their fundraising with a “friends and family” round. They are not necessarily investing in money, they’re essentially investing in the idea and investing their trust on you. These are the people that already know you, like and trust you and believe in you the most.
For investment, Alejandro Cremades, an author of The Art of Startup Fundraising & Serial Entrepreneur said that Non-Accredited Investors usually may not provide a lot of money.
“It could range from USD 1,000 to USD 200,000. However, if you can’t raise money from this group, other investors might start questioning why,” said Alejandro to Forbes.
Accelerators & Incubators
Joining an accelerator program is one huge step for your startup. They’ll invest in potential startups and give you access to mentorship and resources, plus intros to potential investors.
If your startup accepted into one of these programs you may receive anywhere from $10,000 to $120,000 in seed money to cultivate your idea and gain traction, while benefiting from additional knowledge and resources
Y Combinator is one of the most well-known incubators in the world. There’s no doubt that it’s super competitive for startups to successfully pass the stage. Based on Capbase’s statement, only less than 3 percent of applicants succeed to get in).
If everything is going well, you’ll get the chance to pitch larger investors and be introduced to funding sources during their demo days that can help take you to the next journey.
Angel Investors
Angel investors are typically high-net-worth people who invest their own money. That means they’re incentivized to be a bit more cautious in their decision-making, so they tend to come in with lower amounts of money than venture capital firms do.
They’re usually founders or tech execs with successful exits who are looking to put their money into promising startups. Angel investor checks usually range from USD 10.000 to USD 250.000, but super angels might invest even more.
They can be approached directly online, at live pitch events, and through introductions from other startup founders. Though they don’t invest in a large amount of money, the connections they bring are often as valuable as the cash itself.
They’re also willing to invest at early stages, like during the seed round—when the company is just getting started, and that’s perfect for new startups.
Startup Syndicates & SPVs
If you need funding fast, syndicates might be your perfect shot. Syndicates are a quick and easy way to get money for your new business.
“You can raise money from many different investors without having each investor directly on your cap table. This cuts down on the legal paperwork required in future financing rounds or acquisition deals,” said startup experts in Capbase, Michał Kowalewski.
You can get advice and resources from this diverse group, but watch out for potential leaks (yeah, startups play dirty sometimes). Startup web AngelList allows investors to contribute as little as USD 1,000 to a syndicate.
Venture Capitalists (VCs)
Venture Capitals come with the biggest checks, the most power to fuel success and gaining market share, and most juice when it comes to achieving more credibility and visibility.
VCs (Venture Capitalists) collect money from limited partners (LPs) and invest them in startups they think will bring big returns.
They take small, risky bets, hoping one of their investments becomes a unicorn (a billion-dollar company). VCs usually offer more money than angel investors or syndicates, but they can be selective. Most won’t invest until your product is making good revenue. If a VC firm shows interest too early, don’t be too excited and be careful.
Banks & Financial Institutions
These aren’t true investors like the others on this list, but they can be sources of capital. Traditional banks are generally not an easy source of capital for early stage startups and small businesses. However, traditional banks are tough to crack for early-stage startups.
Once your company is more established, they may offer venture debt, business credit cards, or credit lines to help with cash flow. Venture debt is great because you get money without giving
up equity, but make sure your company is solid, as you’ll need to pay it back before any other debts.
Corporate Venture Capital (CVC)
Corporate VC is when big companies invest in startups to tap into their tech or talent. Think of it as a mutual growth plan: the corporation provides funding, and in exchange, they get to stay ahead of the innovation curve. Google, Salesforce, and Intel all have CVC arms, and they invest across industries from biotech to media.
Before you start pitching, understand which type of investor aligns best with your company’s stage and needs. Early-stage companies should look at angels, syndicates, or accelerators, while more mature startups might find value in VCs or corporate venture arms.
