This is How you Get Capital for your Startup

The business idea is ready. Perhaps a company has already been founded or your startup is already making its first sales. But now the growth phase follows and you really want to get started with your startup. Most of the time, the limiting factor is not creativity, time, hard work or a strong founding team, but simply: capital. That is why it is important not only to combine skills in the team within the framework of the actual start-up project, but also to master the fundraising basics. Where can I find startup investors? And what role do the so-called stages - i.e. development phases - play in which your startup is currently in? In this post we would like to explain the most important sources of capital.

Which type of investor is best?

Not every type of investor is necessarily an option for your company.0

Many only invest in the later growth phases of the company, while others join the company immediately after the idea arises. So here you should keep an eye on what types of investors there are so that you can target them and win them over.A

IN THE DIRECT ENVIRONMENT: FRIENDS, FAMILY AND FOOLS

1. One of the most obvious areas in which you can find investors for your business idea early on is your direct, private environment. Friends and relatives know the founder personally. An assessment of the team and their competencies is therefore possible from a special point of view that other investors do not have. The founders also have a leap of faith if it can be seen that the team is “committed to the cause”.
2. But accepting money from the personal environment also has its pitfalls. “Friendship ends with money” is a well-known saying. The problem is not the money itself, but the frequent lack of transparency about the actual risk of a start-up. The majority of all start-ups fail, the capital is quickly used up and sales initially fail. So even if the project was promising, the liquidity runs out in the meantime. The initial euphoria of private investors quickly turns into disappointment. This often affects the personal relationship. Because: Not everyone succeeds in making a clear distinction between personal and business issues.
3. Angel investors, sometimes also referred to as business angels, are mostly wealthy private individuals who want to invest capital in new startups in order to create something new together as a team. Angel investors are therefore often intrinsically motivated and open to actively assisting the team as advisors. Angel investors can be very valuable for startups, as they not only raise the necessary capital, but also bring in important know-how that is otherwise difficult to access.
4. Angel investors usually participate in startups within a range of € 50,000 to € 200,000 that are in the very early phases, i.e. in the pre-seed or seed stage. The participation is then usually as a share in the company, as a convertible or as a loan.
5. It is important to understand that angel investors ultimately invest their own money and therefore work a little differently than venture capital funds, for example. In other words: Angel investors can sometimes have very different strategic or individual focuses. Angel investors who only invest occasionally usually take much longer to come to a decision and tend to be non-binding. Active and more professional business angels, on the other hand, make about six deals per year on average and are therefore also familiar with corporate law processes.

Since private investors rarely appear officially because, unlike venture capital funds, they are not obliged to actively invest in startups, it is often a challenge to find business angels. A targeted approach and research of the previous activities of the angel investor, but also a certain variety of available investors increases the probability of a meeting enormously.

PROFESSIONAL INVESTORS WITH LARGE INVESTMENT TICKETS: VENTURE-CAPITAL-FOND

Venture capital (VC) or venture capital describes a subset of private equity in which the investment entered into by the investor cannot be traded on regulated markets (stock exchanges). The difference in the term venture capital is not clearly defined, but it specifically means the private equity component, which consists of young companies that are not yet generating any sales or profits. Although these can already be positive in terms of sales or profits, they still require additional capital for the scaling and growth phase.