Raising capital to launch your business and create jobs is a fundamental part of capitalism. Ideas start by understanding a gap or unmet need in the marketplace by entrepreneurs who then build solid business plans and search for capital to take their ideas to market. Enter angel or venture capital investors.
Your Network includes family, friends, colleagues, your LinkedIn network or anyone that has available cash and believes in both you and your idea. Your network can be a huge help and is critical to help launch your company in its early phases. The thing to remember about your network is to a) define the parameters for which you feel comfortable pitching dollars to and b) understanding that there are a lot of individuals out there who have resources and are very interested to invest into great ideas!
Angel investors are individual investors that typically invest anywhere from $15,000 to $100,000 into young businesses and expect a return on their investment down the line. They typically display some level of sophistication during the investment process.
Angel groups are organized angel investors that typically range in size of between 5 and 50 in one group. Typically, they choose areas of business that are familiar to them to invest into such as advertising, medical sensors and healthcare. Angel groups are early investors into early stage companies and typically invest anywhere between $50,000 to $500,000 for any one deal. For any entrepreneur that is interested in working with angel groups, an important question to ask of these groups is how active they are investing and the names of both successful and successful ventures they have invested into.
Venture Capital is a key ingredient to taking your business from the idea phase to the growth and sustaining phase of your business cycle. Venture capital groups are located throughout the world. Many times, venture capital groups will focus their energy on specific regions, business categories and stages of business. A first round of capital from a venture capital group will typically yield anywhere between $1M-$2M dollars in new capital for the company. An entrepreneur, if successful, can expect to raise between $1.5M-$5M in a second round of capital.
If you are an entrepreneur and have questions about any of these stages and what typically goes into a negotiation, please contact me through Twitter to set up a time to talk!