Navigating the world of startup investors can be overwhelming, but choosing the right funding source is essential for your startup's success. Here's a concise guide to the key investor types for new founders:
- Friends & family: These are people who invest in your startup because they know you and want to support you, not necessarily because they believe in your idea.
- Business Angels: These individuals invest their capital in early-stage startups, often within their expertise or geographic area. Full-time angels focus solely on investing, while part-time angels balance investments with other work.
- Syndicates: Syndicates are groups of business angels who pool their resources to invest collectively. Joining a syndicate allows investors to diversify their portfolios and venture into unfamiliar domains. Some syndicates have lead investors who receive a higher percentage of profits, typically 15-20%.
- VC Funds and Micro VCs: Venture capital funds vary in size and staffing. Micro VCs are smaller versions of traditional VC funds. These funds pool contributions from general and limited partners to invest in startups. Contrary to popular perception, venture funds aren't just about formal attire; they represent managed pools of investment capital.
Choose the investor type that aligns with your startup's needs and stage of development.