As an investor looking for private funding sources, the current funding climate can be a difficult and perplexing place to be. There is a great deal of confusion about what is “safe” investment money and what is not. The current funding climate is fraught with uncertainty. In fact, funding is increasingly difficult to secure, as investors become uncertain about the health of the American economy or the viability of government programs. Consequently, it is important that the savvy private investor has a good understanding of what he or she is looking for and how to find it.
In order to be successful in securing private funding for their own venture, the investor must have an extensive understanding of the various investment options and what each one means to the investor. This includes understanding the risks inherent in some investments and the potential upside of other investments. Thus, it is necessary for an investor to understand the investment climate to be able to make sound investments.
Private funding sources come in many forms. While distressed debt investors remain a strong source of short-term funding, there are other means of private funding for businesses such as angel investors, venture capitalists, and Yahoo! Ventures. Private investor sources also come in the form of registered investment funds, life insurance companies acting as venture capitalists, and real estate professionals who act as private funding sources for companies looking to raise new capital. Furthermore, non-traditional financing sources such as wealthy individual investors and venture capital firms also serve as significant sources of potential funding for startups in the early days of growth.
A number of methods exist for obtaining startup capital from a number of sources including angel groups, life insurance companies, venture capitalists, and wealthy individual investors. An investor must be consistent in pursuing a variety of investment goals in order to meet their goal of obtaining consistent, reliable funding. For instance, if an investor is seeking funding for one business startup, then pursuing multiple startup funding goals is a good idea. A variety of investment goals will help to ensure success in finding the right funding source and will prevent the investor from becoming discouraged.
The most common method for finding funding for new businesses is to seek investment from a small group of angel investors or venture capitalists. In general, larger numbers of investors mean larger investment potential for the business startup. Additionally, larger investors have access to more capital which can be quickly and easily leveraged for a better return on investment.
Most new businesses will eventually seek financing from traditional sources such as banks, investment firms, and credit unions. These sources of funding can prove to be highly expensive. However, in the case of startups it is important that these financing opportunities are pursued quickly in order to avoid losses to the company. Many angel groups and venture capitalists may invest in a company for a set time period at a cost called a “seed” fee. This fee is extremely important and should be paid on a regular basis in order to maximize its potential for future profits. In addition, hiring a lawyer to aggressively pursue a loan or partnership deal will significantly improve the chances of success.