Raising Money – Angels Investment Vs Venture Capital
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Seed capital/Seed round/Seed funding
Say, 3 people decide to start a business in biotechnology. They do so by incorporating a company limited by shares. They provide the initial capital. They are the only three shareholders. They are the founders of the company. The initial capital they provide is known as seed capital. The process of such injection of capital is known as a seed round or seed funding. The amount of money involved is usually relatively small – e.g., around US$10,000 or less. The money is primarily used to cover preliminary expenses such as market research and product development.
Angel investors/Angel round
As time goes by, the company needs further funding. The 3 founders, though with unlimited passion for their business, have limited wealth. The company is likely to still be in its preliminary stages – not generating any revenue, or with limited sales and earnings – but looks for further growth. It is not attractive enough for venture capitalists yet. This is when angel investors come in. They bridge the gap between seed capital and venture capital.
Health Warning:
Venture capital money is not for the faint-hearted. Too often, it is only for the desperate – unless your desire is to build a business with an exit strategy in mind from day 1. There is nothing wrong with such a goal in the short term, as the returns can be staggering, but expect to make them many – many more millions than your side – that is if you even get that far. A great many other original creators have been squeezed out long before the ‘D-day – big pay day’.
New business loans are beneficial loan option for people who want to start their own new venture. Borrowers who are suffering from bad credit status due to arrears, defaults, CCJ, IVA etc. are also eligible. With timely payment of loan installments, you can also increase your credit status.
Venture capitalists generally ask for convertible preferred shares. Most certainly venture capitalists will also demand a board seat(s) as this gives them more control over the company than being mere shareholders
Resource Author Francisco Rodriguez H.
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