Raising the required funds is not an easy task for an entrepreneur who wishes to launch a start-up business. Young entrepreneurs have the required passion, exhilarating ideas and motivation to succeed. However, what they lack is the required funds to practically implement their ideas.
Numerous types of investors are available that can invest their capital into a start-up, providing enough boost to get the business on its feet.
A lot of young entrepreneurs consider angel investments as a viable option. An angel investor is a person who has substantial amount of funds, or in some cases, a good earning potential and is interested to invest in businesses that seem promising. Most of these investors invest funds ranging from $10,000 to a $100,000 or more, expecting high returns.
Venture capitalists invest in high-risk high-return businesses. They are among one of the most important sources of funding for start-up businesses that have a high potential for growth. Most of the venture capital comes from wealthy investors, banks as well as some financial institutions.
Angel funds comprise of a combination of investment from angel investors and the traditional venture capitalists. A group of investors pool their money to make up several individual investments. For example, let’s say 10 individuals pool together $50,000 each, making it a total of $500,000; his total amount would then be used for various investments to diversify the risk.
Banks can be a good source of capital for new start-ups. However, a bank would need some kind of a surety before it will approve a loan. This surety can be an asset such as a home equity loan. Getting a loan from a bank is only suitable if a business has some asset that it can use as a guarantee.