How to look for $$$ in any startup ?
Most popular ways to gain investing on startups
Looking for boost of money in every startup is quite an interesting topic. It is not easy to raise funds for scaling, opening new department or "just"business development. Working with many startups and observing the industry closely, I have noticed a significant increase in the importance of the alternative forms of financing enterprises.
I decided to investigate this phenomenon and describe it in more details. During the last year at Codest, we were in business with many startups, who had a need for technological support or creation of a specific software. At the time, I noticed that a number of startups were looking for financing in three popular sources. Here they are:
1.Business Angels. They are the people with an extensive business experience, who have the capital allocated for external investments. Business angels usually decide to invest in the early stage of a company's development - referred to as Seed Stage. In addition to the financing itself, they substantively support a startup in its development (for example, they can share their own business contacts). In return, the investor receives a participation package in the startup.
2. Venture Capital. In the case of this form of financing, external investors bring their own capital to the company for a specified period (usually 5-10 years). The factor determining the investment is a potential chance of rapid growth of the company and participation in its profits. In return, the investor receives shares in the enterprise. Venture Capital is a very similar form of investment to Business Angels. The difference, however is, that in the case of Venture Capital, the investment does not occur at the Seed Stage, because it involves a high risk of failure. Therefore, most often Venture Capital supports applies to large enterprises with a strong market position.
3. Crowdfunding. It is a form of financing through a community of people interested in a given project. However, this shouldn’t be confused with a public collection. The difference is that in the case of crowdfunding, the project provider (entity applying for financial support) undertakes to perform certain activities for the benefit of the person supporting their project. In the public collection, the entire process takes place without any obligations. Crowdfunding is a very dynamically developing form of startup funding. It looks really simple and an investment acquisition period is relatively short.
In my opinion, these are the three of the most interesting alternative forms of financing startups. It should be remembered that large investments are particularly sought after by startups that have high technological requirements.
That is my point of view, but I will gladly meet your experiences related to financing startups. Let me know your opinions in the comments.