If your growing company is in need of capital, you have a few options to consider. Before you begin your capital-raising journey, contact an experienced venture capital attorney in Los Angeles to assist you in understanding the different types of investors and what is the best fit for your company.
Friends and Family Investors
Acquaintances such as family and friends may be willing to invest in your growing company. Friends and family investors often join early on and, generally, invest on more company favorable terms with fewer legal protections than later-round investors.
Angel investors are wealthy investors who typically focus on early stage companies, including pre-revenue companies, often through clubs, associations, or angel investment groups. Many angel investors are prosperous entrepreneurs who have successfully started their own company and subsequently sold the company or taken it public. Angel investors are also typically experts in their fields and can be a valuable source of advice. They will definitely demand better economic terms and more stringent legal protections than friends and family investors.
Incubators and Accelerators
Business incubators and accelerator are programs that provide entrepreneurs with assistance and support in starting and growing their businesses. This includes strategic advice, networking, and training. Many incubators provide the office facilities in a shared workplace. This allows participating entrepreneurs to interact with one another and network. Incubators and Accelerators usually negotiate an equity ownership in the company for the services being rendered through a form of a warrant.
Generally, venture capitalists invest in later stages, after other investors have funded the initial start-up of the company. VC’s are motivated by the potential high ROI either through the sale of the company or an IPO. Venture capitalists also want a steeper return on their investment than what the interest rate may be on a business loan.
Strategic investors are established companies that invest in later stage businesses, typically in the same industry. Strategic investors may be willing to invest at a higher valuation than a venture capital investor because they are likely investing in the company to achieve their own benefits that go beyond just the monetary return that venture capitalists and other financial investors are focused on.
A bank loan may be available to assist you with startup costs. Before a bank will grant you a loan, though, they will want to see a detailed business plan and a thorough description of your business and its prospects. Typically, banks will want some type of collateral or personal guaranty to secure the loans they are making
If your growing business is in need of funding, or if you are thinking of starting a new company and have questions /concerns, contact the highly experienced and reputable Afshin Hakim of Hakim Law Group to schedule a consultation at (310) 993-2203 or for further information please visit www.HakimLawGroup.com to learn more.