What are Start up Investors?

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  • Written By: Jeremy Laukkonen
  • Edited By: Michelle Arevalo
  • Last Modified Date: 23 February 2020
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Start up investors can help fund a new business at its earliest stages of development. Typically, a start up investor will provide the cash that a business needs to set up operations, hire staff, and begin developing a product or offering a service. The most common sources of start up funds include personal assets, friends, and family. Other start up investors may look for a stake in the company, stock options if the company plans to offer an initial public offering (IPO), or other well-defined exit strategies.

The process of attracting start up investors can be either difficult or relatively simple, depending on the industry and the experience of the principals. If the founders of a new business have a proven track record in the industry, they may leverage that to attract a variety of seed investors outside the normal circle of family and friends. If a corporate structure is being used, attaching experienced people as board members or advisers can also help attract investors.

A solid business plan may also be an essential part of securing start up funds. This will usually include an executive summary, which outlines all of the principals, executives, and board members involved in the business. It will also typically consist of a thorough statement of the purpose of the business, how it will operate, what function it will serve, and how it will ultimately succeed. A coherent and convincing business plan can be very important to many start up investors.


The start up stage of any business usually begins with research and investigation into the viability of the business model, and ends with a second round of funding or in positive cash flow. If a new business requires additional funds to continue growing beyond the start up phase, the principals may look for angel investors or venture capitalists, depending on how much money they need and how much control of the business they are willing to give up. Angel investors typically invest their own money, while venture capitalists often control larger pools of assets and are able to provide considerably larger cash infusions.

Outside interests, such as angel investors and venture capital firms, typically prefer to invest in businesses that are already up and running. Venture capitalists usually deal with very large investments and often take a controlling share of the company. Angel investors generally invest smaller amounts of money, tend to invest in smaller, riskier businesses, and often look for much higher returns on their investments. Angel investors also often act as a bridge between friends-and-family type start up investors and the much larger amounts of cash obtained from venture capital investors.



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