Angel Investors, Incubators, and More: Here Are All the Types of Startup Investors
We’ve tackled the different stages of startup investments, from seed funding to series C funding, so now let’s take a look at here you can actually get funding for your startup. Most people understand the term “venture capital,” which refers to funding coming from a venture capital fund or firm that focuses on helping startups grow. But there are actually plenty of other sources of funding for startups.
For this list, we’re excluding business loans, credit cards, and liquidation of assets, focusing instead on funds that don’t need to be paid back.
Here’s a quick crash course on the eight types of startup investors:
1| Venture Capital
The first and most known is the venture capital firm, also known as a VC. These are organizations dedicated to providing capital and offering expertise and mentorship in exchange for an equity stake. VCs are organizations made up startup veterans who are experienced enough to spot startups that will be a good investment as VCs typically write the biggest checks.
2| Corporate Venture Capital
Corporate VCs operate in the same way as VCs, only they’re attached to large companies and conglomerates. Corporate VCs typically invest corporate funds in external startups that will benefit the conglomerate’s ecosystem. Typically, large capital is offered in exchange for equity or services that could benefit the conglomerate.
3| Angel Investors
While VCs are organizations run by a team of people, angel investors operate individually. They’re ultra-high net worth individuals who use personal funds for startup investments and also offer mentorship. These angel investors typically participate in the pre-seed or seed funding rounds, and rarely in higher series A, B, or C funding.
Incubators offer minimal capital compared to other investors on this list, but they do offer other methods of investment: mentorship, training, workshops, work spaces, and more. They typically come in at the very early stage of a startup to help flesh out ideas and polish business models.
While incubators focus on growing a startup’s big idea, accelerators focus on growing the business itself. Like the name suggests, an accelerator helps startups scale their business, and like incubators, act as a stepping stone for startups to connect to its wide network of angel investors, venture capital funds, and more. Investments are also typically smaller, but accelerators and incubators offer the gateway to biggest investors.
6| Private Equity Funds
Only a handful of startups will ever encounter a private equity fund. These are late stage funding players who save their capital for the best and brightest. This type of investor focuses on long-term investments with startups that have already proven themselves, and it's said that securing a private equity fund investment puts you on the path toward an IPO.
7| Family Offices
Family offices refer to the private wealth management firms for families of ultra-high net worth individuals looking to invest in promising startups. According to Foxmont Capital, family officers are “more agile and flexible as they have an indefinite fund life and typically no investment horizons.” Since each family office differs depending on the family behind it, the priorities and interests will differ.
This is actually the most common way startups and small businesses get started: by raising funds from friends and family. If your idea has the potential to go viral, then you can utilize crowdfunding platforms at your disposal. While crowdfunding won’t raise as much capital as say, a venture capital firm or angel investor, it is an effective and resourceful fundraising method in the pre-seed stage.
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