Be Careful While Looking for Investors

Investment plays a vital role in the growth and expansion of any business or company. All the start-ups, ventures and businesses require funds at some or other stage of their development. Capital is one of the key to any business. Those, who are looking for investors, should consider angel investors and venture capital as the last options for fundraising because as investors they take a significant percentage of your company’s equity and get the opportunities to exercise indirect and often direct control and influence over your decisions. They play a major role in addressing issues, arising from financial requirements of the company. They not only invest a major sum of capital in firms but also put-in their time and experience, and play the role of an adviser or consultant for the company.

Searching the right investor for your venture is further a big deal. The best way to find investors is through business networking. Firstly, you need to analyze and make your mind up in relation to what type of investor is best suited for your enterprise that can provide funds on reasonable terms, taking the least amount of your company’s equity. If you are looking for investors for a big amount of capital, then venture capital firms are the ones you should go for, as angel investors are rather modest in investing, as compared to venture capitalists. Venture capital provides funds and also offers value added services like mentoring, alliances and facilitate way out. They assist you in running your firm successfully with their invaluable source of information, resources and contacts. They try to comprehend their investment in a company in three to five years.

But like every good thing, Venture Capital also has some shortcomings. An entrepreneur should seek venture capital only if his business plan is able to provide liquidity in given time otherwise venture capital may not be appropriate. Another disadvantage is that securing any deal with them is a long and intricate course of action, including a lot of paper work too. For illustrating a business plan and financial projections, you may need to hire professionals. You should be prepared for being in greater scrutiny in compliance to your duties and responsibilities in the direction of your venture. You will have to provide a regular advancement report of your company’s progression. You may undergo financial pressure in organizing finance for legal and accounting fees, payable at deal negotiable stage, regardless of success or failure of your funding deal. Considering all these factors, only an entrepreneur can choose whether giving up a part of their ownership in return of the funds from Venture Capital, is a cost-effective deal or not.

Most early stage start-ups need small amount of money, for which angel investor funding is well-matched. An angel investor can provide that finance without pooling from other sources, unlike venture capital. Angel investors business deals are often more flexible and negotiable as they invest their own money. Due to their informal investment criteria, angel investors are an excellent source of capital. Other than capital, angel investors can also provide much needed support, expertise and contacts from their own entrepreneurial experience and successful leaderships. But angel investment also has some limitations like possible denial of follow-on investment, deceptiveness of investors, lack of national recognition etc. So a good amount of research and analysis is required if you are looking for investors.