When growing a business quickly, it can be helpful to have equity investment to support growth that may be too speculative for a bank or lender.
There are a few common types of equity investors, as explained in this Entrepreneur.com article:
- Private equity (PE). PE covers a number of investment types that are usually made by private individuals or privately-owned institutions to purchase a company, fund a project or make a private investment.
- Venture capital (VC). VC investments are managed differently and usually designed to fund startup companies with the potential for high growth. VCs also provide startups business-planning expertise and assistance.
- Angel investing. Angel investors are high net worth individuals who seek high returns through private investments in startup companies.They provide similar startup financing as venture capitalists in smaller amounts.
In general, if you're wanting to maintain the maximum amount of ownership in the business, it can be helpful to self finance your growth as much as possible. The bigger the pie is by the time you raise money, the more $ you get for each %.
Like a marriage, it's important to have an ideal fit and alignment with the part you will be linking arms with for years to come. The ease of accepting money from trusted family members can quickly take a relational toll over time.
Finding an investor that can offer some additional non-monetary value (ie, industry expertise or meaningful introductions) will set your business up for greater chances of success.
As you begin conversations with investors, be sure to understand the value of your business.