Lesson Progress
0% Complete
Transcript
Investors can be institutional investors like the company I work for where we do investment from a fund for a living. Usually when people have to start their business or plan to start, they use their own savings and maybe a help, we call it family and friends programme. So you approach your friends, you try to convince your family and that’s how you start your business and it’s depending on the business model you have. If you have an income stream right away, or if you need to prefinance a couple of months or whatever before you have your first revenue and are able to pay from this cash income.
So the first start is usually family and friends, own savings, and here in Germany we have this public support programmes, which can be grants for founders or small loans, microloans for founders, which together can give a company a very decent start for the first six months to one year. Then usually next step is looking for angel investors. This can be people you are acquainted to, this can be people who are interested in young companies and have maybe an understanding of the markets you are aiming at. So they are maybe not professional investors, but they are people who say “I know directly exactly what you want to do because I have been working in this environment” or “I have some know how about this fund” for whatever reasons and “I think I like your idea, I think it’s very smart.” And therefore they take their own money and provide this for you against some part of the shares because they believe in you and your business idea. And with that you can grow the company even further along the line. And then if the company is still a growth company and still needs external fundings because the out payments are bigger than the income stream because it’s still aiming for high growth.
The next step may be approaching professional investors. This can be seed funds, early stage funds, so funds who would like to seek some first foot in the market, maybe some first customers they can talk to for reference, and then they would invest in the company to add a valuation and provide additional means. So even talking to a bank can be a potential financing opportunity, but one has to understand that the bank, if you are a startup and have no revenues they would like to have a personal liability from the owners or the founders, and this is something people have to think about. Is there a high risk connected to my business idea? Then maybe an investor who takes equity, so part of the company’s shares against investment, is maybe a better opportunity.
If you have revenues from day one or two and have not such a high growth curve in front of you so you grow more from organic, then you might be able to convince a bank and take the risk of a loan. If it is a public funded bank like our parent then these microloans with a low or no personal liability, which can be a good start as well.
