Working With Private Investors and Venture Capitalists

Money available to businesses from conventional banking sources has become very limited over the last year or so. At the same time the amount of private capital in the market has been increasing. More and more business owners are finding it necessary to seek money from alternative sources such as venture capitalists and private investors. This type of capital is especially useful when starting a new company.

There are several sources of private investment money. The largest sums of money comes from venture capitalist firms. These group investors provide seed money for new or emerging companies in exchange for equity in the company. This is a good source of capital for all types of businesses. The venture capitalists will be looking for companies with a good idea, good business plans and a high potential for growth. These firms are large and often willing to invest great sums of money in chosen businesses. While most investment firms specialize in start up money, many also provide mezzanine financing, or later stage capital.

Angel Investors are another source of private investment. They are a type of venture capital investor that consists of anywhere from ten to one hundred and fifty individual investors, but the average number is seventy to eighty investors in each network. Instead of investing on their own in one business Angel Investors form a network allowing them to diversify their investments. Venture capital firms generally want a lot of control and a high rate of return, 20% or more, but these lenders often take less control and require a lower rate of return.

Private investors are looking for companies in which to invest, but they usually follow some strict criteria when choosing. In order to obtain money from private investors you will need to have a good business plan and creative ideas. Private investors are looking for capital growth and revenue that is expected to increase over time as well as a good management. They may even take the background and personality of the entrepreneur into account. The more charismatic the entrepreneur and the more belief they are able to convey in their business the more likely they will be able to obtain capital through private investment.

Obtaining private capital can be a complicated process. Many venture capital firms and angel investors specialize in certain types of businesses. It may be advantageous for a business owner to work with a broker to find the right firms to target when trying to raise capital.