Understanding Right Investors for your Startup

by September 30, 2019 0 comments Blog

As an entrepreneurs it is very important to understand various avenues to raise funds for your venture.

There are lots of misconception about whom to approach for money for your #startup. Lets #demystify them.

1. 3Fs – This is the best source during very early stages of your startup. 3Fs stands for #Friends#Family and #Fans .

This will help you to raise initial capital after bootstrapping to validate your idea or develop POC (Proof of Concept).

2. Angel Investors – After family and friends, angel investors are the next avenue you are likely to encounter. VC firms usually won’t be interested to fund if you are not ready with MVP (Minimum Viable Product).

These are the people who will fund your small need of capital to develop MVP. Average ticket size varies from $10K – $100K with small equity dilution.

It is advisable to look out for strategic angel investors who can help you in decision making apart from providing funds.

3. Accelerators – This has grown in popularity over last few years. Accelerators often provides cash (small amount ranging from $10K – $30K), working space and mentoring. It is very difficult to get in but worth trying.

Few prominent accelerators are YC, Techstars, Surge etc

4. Crowdfunding – This is the way of using internet to reach out to large number of people each for small amount of money. Few best known platforms are CrowdCube ,Seedrs etc.

5. Venture Capital (VC) – These are investment funds focused on Startups at growth stage. VC firms funds startups through several rounds (Series A, B and so on) until company is able to go public or acquired by large company.

Note that there are many VC funds focuses on early stage startups as well considering mushrooming of startups from last 3-4 years.

6. Debt Funding – This is borrowing money from a lender. This is typically suitable for later stage startups with steady and predictable revenue and substantial assets. Early stage startups should completely avoid debt funding option.

It is very important to match your startup stage with right types of investors or source.

Please leave your questions/comments here. I will be happy to answer.


About Author

Suneel Hegde

Co-Founder & CEO, MentorAlly


Follow me on LinkedIn – https://www.linkedin.com/in/suneel-hegde-3a4ba646/

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