Should you get an investor for your startup business? The answer is “maybe.” That’s right….maybe. Not every startup business needs an outside investor. It depends on what you do and what your goals are down the line.
An investor puts money into a business or in support of a product with the expectation of receiving a financial return. When an investor looks to invest money they are looking to make a lot of profit for the least risk. There are investors that invest when the risk is high but only when the financial outcome will be higher than average.
There are several different types of investors: angel investors, donors, venture capitalists and corporate investors are the most commonly heard about.
Angel investors are individuals with nest eggs and surplus cash that invest in industries they are familiar with.
Donors are individuals, corporate entities and foundations that give monies to a cause to receive a tax break, market their company and make a difference. Donors generally give to not-for-profit companies and individuals.
Venture capitalists invest with the intention of becoming a partner in the company they are investing in. Venture capitalists are generally investment companies or fund managers.
Corporate investors want to buy you out. They are typically larger successful companies.
When you decide to pursue an investor you must do thorough research on the investor, as the investor will definitely do their research on you. Pursue an investor if you plan to launch a lucrative business idea, pay out debt, create new products, expand or launch a marketing campaign. A huge plus to having an investor is having a financial partner to assist you with theses items and making a large profit for your business that will include a steady salary. The negative side is that you have to treat this investment like a loan and pay it back in addition to the investor possibly wanting a percentage of your company. A donor traditionally will not do that but will expect to see outcomes.
In order to obtain an investor you will need to have your business in order. All documents, financial statements, partnership agreements, business plan and marketing plans need to be available for their review. If you don't feel confident enough to approach one, or simply has got everything organized see my post on business plan ettiquette to wow investors. A good investor will expect to see stability. Having all these items in order is the first sign of a good partnership.