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What are the Different Kinds of Capital Investors?

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  • Written By: Malcolm Tatum
  • Edited By: Bronwyn Harris
  • Last Modified Date: 22 January 2020
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Capital investors come in a wide variety of types. Some are focused on providing venture capital for startup businesses, while others are focused on private investments that aid in the development of new products. Among the different kinds of capital investors are individuals, firms, and even banks that may choose to partner with other entities as part of a plan to invest capital and earn some type of return from that venture.

Sometimes known as angel investors or seed investors, private capital investors often provide new businesses with the funds necessary to launch and maintain the operation until the business begins to generate enough revenue to function without assistance. In some cases, a private capital investor may not only provide funding but also offer skills and experience that can aid the business in becoming successful. In return, the investor may receive interest along with a return of the principal investment, or possibly receive shares of stock during the initial public offering that can be cashed in or converted at a later date.

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Public capital investors are those who wait until a company has gone public and issued shares of stock before making an investment. Investors of this type are not often classed as angel investors, since they choose to purchase a portion of the company once it is established and financially stable enough to issue shares of stock. In many cases, investors of this type are looking for investments that can be held over the long-term and earn a consistent return for a number of years.

Venture capital investors look for opportunities to fund business expansions, mergers, and other business efforts that are likely to become lucrative over time. A venture capitalist may be an individual investor, a consortium of investors, or even an investment bank that specializes in underwriting venture capital deals. As with other types of investors, the goal is to earn a return on the investment with a reasonable period of time, with that return provided either in cash or stocks that can be managed in any way the investor chooses.

Capital investors provide resources that are essential to allow businesses to launch and eventually become established, or to expand an existing operation and increase its market share. In return for their support, investors receive compensation along with a return of their original investment in some form. Without private and public investors to aid in the development of new ventures, many businesses would be unable to make it through those first difficult months and years before eventually becoming a profitable enterprise that provides jobs and aids in keeping the economy stable.

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