There are various types of investors who are ready and willing to serve as your strategic partner in the realization of your dream to be the change. Unfortunately, many entrepreneurs, businesses, and “idea men/women” are familiar with just one or two of these investment types. As a strategic advisory group that specializes in impact investing, however, we here at CLC Global Advisors (and our CEO Carole Crist), are more than familiar with these diverse avenues of capital injection, so today we’re sharing that information with you!
Types of Investors: Strategic Partners Explained
Angel investors are individuals who have an earned income exceeding $200,000 or have a net worth of more than $1 million. Angel investors can be found in a wide range of industry niches and their investment interests aren’t always limited to their own niche of specialization. Angel investors are useful to small businesses and entrepreneurs who have already obtained seed capital and established their business or product, but who are not yet earning revenue enough to justify venture capital investments.
Venture capitalists are investors who are usually looking to invest a substantial amount of money (think $10 million+) in a business or product that is earning a considerable amount of revenue. In other words, these investors are looking to invest in profitable companies. Venture capital investment agreements are made on the contingency of carried interest being paid back to the investor as compensation for their investment.
Personal investors are exactly what they sound like – individuals who are close friends, family, or acquaintances of a business owner or entrepreneur who are willing to invest money into a product, service, or business. This is often one of the first sources of funding sought by entrepreneurs, but it does carry some limitations and there are some problems intrinsic to this type of funding. Firstly, the amount of money that personal investors can (and are willing to) invest, is generally much less than the more professional investors would make. This can limit funding and mean that a larger number of investors are needed to realize a product, service, or business. Secondly, asking friends, family, and acquaintances for funding can be uncomfortable at best. Thirdly, there are legal limitations and ramifications of investing which can turn off personal investors making it more difficult to obtain funding in this way.
Peer to Peer Lending
Peer to peer lending is a type of investing in which individuals or groups offer funding. This type of funding is usually done through “lending clubs”. For example, an entrepreneur seeking funding for their new product may apply for funding through XYZ peer to peer lending group. If that application is approved, the members of that lending club would then decide for themselves whether or not they wish to invest in the business. So, Joe B may decide that it’s a great investment for him because he is interested in the product the company is built around. However, Marjorie S may decide that she has no interest in the investment opportunity because it’s not a product or business that she is interested in.
Banks are the most recognized source of funding for a startup, business, or entrepreneurial project. To obtain funding from a bank, a business or entrepreneur must usually provide proof of income or collateral to secure a loan. It is for this reason that many new businesses have difficulty securing bank loans because they have not yet built a solid revenue stream and have little to no collateral to secure their loan. This is why most entrepreneurs and new businesses seek funding elsewhere and why bank loans are a tool more often used by established businesses.
Deciding Which Investment Type is Right For You
There are many factors that go into deciding which investment type is right for you and it’s often best to consult an advisor (like those we have on staff here at CLC Global) to help to match you with the right type of cash injection. An advisor can not only help you to decide which type of investor is right for your business at its current stage of growth, but they can also help to match you with their own network of investors.
Are You Interested In Finding These Types of Investors to Serve As Your Strategic Partners?
If you’re looking for strategic partners to aid in your business, product, or idea that is focused on creating positive change, CLC Global Advisors can help. Give us a call today at 305-467-3432, or drop us a note through our website contact form and we’ll get in touch!