Investing in startups: learn about the types of investments and learn how you can start investing now
Startups are responsible for creating thousands of innovative solutions that are revolutionizing the market. Thus, investing in startups is a good way to make a lot of money with these businesses.
Startups are usually born with few financial resources. Often, the founding partners themselves invest in their businesses in order to start operations. Putting a little money together here and there, these businesses can go ahead — or not — depending on how the solution stands out in the market, if the solution has a high degree of innovation and also how it is received by its target audience. In the most positive scenario, these startups will need more money to scale and mature. And those who enter the scene are investors.
Unlike what many think, investors are not just banks, funds and people who have millions available to make contributions. Today, we can say that anyone can become a startup investor , aware of the risks and opportunities of this type of investment. In this article, we separate the main categories of investors and how each one operates. See :
Types of startup investors
Angel Investors : These are individuals who invest their own money in early stage startups . These contributions vary from startup to startup and, of course, from investor to investor.
In almost all cases, angel investors are the first investors a startup will have. The role of this type of investor is very important for startups that are still in the process of establishing their brand, their solution.
In general, angel investors have experience in the sector in which the startup is operating, but it is not mandatory to have this background . However, if the investor has this industry experience, he will certainly have an important role in advising or mentoring the startup processes.
Very important: receiving feedback and contributions is a process of mutual enrichment. For the startup, it is the opportunity to adjust routes while it is still in the process of maturing. For investors, it is an opportunity to exert influence and pass on knowledge, contributing to the rise of the business. It’s always worth remembering that open innovation is about collaboration!
In addition, angel investors generally have a valuable network of contacts. So a good angel investor can open many doors for startups.
Crowdfunding investors : These are individuals who invest small amounts of money into a startup through crowdfunding platforms, usually in exchange for rewards or future ownership in the company.
Crowdfunding is an investment modality that has been growing a lot in recent years. In the market, there are platforms with different focuses and, therefore, researching which one best fits your profile, what is the average ticket and which startups make up the portfolio, for example, are ways to understand more about this fundraising strategy.
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We can say that angel investors and crowdfunding investors play an extremely important role for startups that are maturing. They are everyday people, who know the importance of communication and collaboration. These actions are extremely valuable for both parties. These investments are very common and, as the minimum amount is usually lower compared to other types, they do not pose as much risk to the investor.
Venture Capital: translated into Portuguese, venture capital, are investment funds that invest in startups in more advanced stages. These funds carry out investment rounds from Series A to Series G, depending on the fund. The bigger the round (A, B, C, D etc.) the bigger the contributions.
Unicorns, for example, are titled like this when they have already performed several rounds, such as Série E and Série F.
Venture capital funds generally have a proven track record of successful investments and can provide additional resources such as a management team and marketing support.
Institutional investors: these are pension funds, banks and other financial institutions that invest in startups. They usually have large amounts of capital to invest and may be less likely to take risks.
Corporate investors: These are established corporations that invest in startups. This modality has been growing a lot since the adoption of the open innovation strategy by corporations.
These corporations can invest to help startups develop their solutions, providing spaces and equipment for testing, and they can acquire a complete technology, aiming at innovation in their products, services and processes, or even entering new markets.
Learn more about smart money and how important it is when investing in startups
Smart money is a term used to describe the investment made by experienced and successful investors in startups and other emerging companies.
These investors usually have a large network of contacts and experience in the industry the startup is in, and are able to provide valuable advice and support to help the startup grow and develop.
In addition, they have the ability to attract other investors, such as venture capital and institutional investors, thus increasing the likelihood of investment success.
It is important to note that the term “ smart money ” does not necessarily refer to the size of the investment, but rather to the quality and experience of the investor. Experienced angel investors, venture capital funds and institutional investors are examples of smart money investors .
Therefore, understanding these investment categories is essential to identify how you can bet and win. The investor-startup relationship requires a lot of transparency and communication. The process can be much smoother and lighter if both parties are committed to the single goal: the growth of the startup.
