The private investors’ market is an ever-changing landscape. While historically most private funding has been driven by wealthy families and individuals, the pace of change over the past few years has been startling. More people are helping people reach their goals of wealth creation via investment, and traditional sources of private financing, such as banks, are being challenged by increasingly accessible online sources. For those who have never explored the private investor marketplace, it can be confusing and somewhat overwhelming. Private investors typically provide seed money to growing startups, helping them to obtain seed credit that helps them in their business development efforts.
Private investment firms typically act as intermediaries between early-stage businesses and venture-capitalists. In exchange for fees, the private investors provide upfront capital to support a company through successful operations and expansion. Many private equity firms also provide a secondary market for related companies; they may purchase a stake in a company’s shares for a similar purpose.
With the advent of online investment, the role of the private investor has changed. A large number of new finance options are available to small and mid-size businesses. As more companies are turning to capital markets to raise capital, there has been a parallel increase in the number of angel investors who are becoming active in these new markets. In addition, private equity firms have become increasingly willing to work with companies looking to leverage private equity. These firms provide seed money, business loans, and other forms of capital to small businesses on terms more favorable to the company.
Business angels are a type of private investor who typically do not need to provide a financial commitment beyond the amount they can potentially provide. Instead, they act as personal advocates, spending significant amounts of time and money on your business in order to ensure it grows to the point where they are able to invest further in your company. Business angels typically provide growth capital as part of a joint venture or acquisition. They often have an established track record of success in business and can provide the additional capital you may need in order to accelerate your growth.
Private equity firms are another type of investor that can provide growth capital. These firms seek to purchase a portion of a company that is valued at a greater than market price in order to create a company that can be sold to private investors. Similar to angel investors, private equity firms are experienced in conducting due diligence investigations to verify the business’ ability to obtain and monetize its future potential. Because they operate in much the same manner as private individuals, it is important to do your due diligence as a small business owner so that your investment does not become tainted by the lack of diligence provided by your potential partner.
In addition to growing your business through the capital provided through your own internal resources, you may also need to turn to outside funding in order to meet ongoing expenses or grow to a point where your profit level is satisfactory. Many businesses start out by providing good service and creating a quality product, but if they do not generate a strong customer base or maintain good growth, they may not be able to sustain operations through the growth years to come. In this case, external funding & investors will provide your company with the additional investment you need in order to sustain or increase operations over the years to come. In many circumstances, funding from an investor will also provide an opportunity for equity holders to sell their shares of ownership in your business should their interests in the business wane. Regardless of the type of investor or investment that you choose, you are sure to make a favorable impact on the world through your innovative products and services, which will attract more funding as time goes by.