A chapter from the Types of Financing Article

Investors

There are many good online resources for finding investors, such as angel.co, where you can find a cross section of the investment landscape. If you’re looking for something specific, here are a few categories:

  • FFF/3F - Friends, Family and Fools

  • Angel investors

  • Seed investors

  • Later stage investors

Friends, Family, and Fools

These are the people you know - you should go to them in the beginning when you have little to show apart from yourself. The people who will invest are those who know you (except for Fools - who don’t have a better option to put their money in) and that’s what matters.

Angel investor

This is a person who invests in a business venture, providing capital for startup or expansion. Angel investors are typically individuals who have spare cash available and are looking for a higher rate of return than would be given by more traditional investments. An Angel usually looks for a return of 25x or more on his investment.

Seed investors

Seed capital is the initial capital used when starting a business, often coming from the founders’ personal assets, friends or family, for covering initial operating expenses and attracting venture capitalists. This type of funding is often obtained in exchange for an equity stake in the enterprise, although with less formal contractual overhead than standard equity financing.

Later stage investors

Capital provided after commercial manufacturing and sales but before any initial public offering. The product or service is in production and is commercially available. The company demonstrates significant revenue growth, but may or may not be showing a profit. It has usually been in business for more than three years

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