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Types Of Investor According To The Stage Of The Company

Meet the types of investors you will encounter in the sector of startups and FinTech

When you create a startup and you need an investment round, you have to know what kind of investors you are going to find in the market. These are the four types of investors depending on the stage in which your business is.

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Phase 1 Investors: They are called the 3F’s: Family, Friends and Fools (relatives, friends and ‘crazy’)

They enter the first stage, when your project can be an idea or a newly established company with little experience. The first sales have appeared or not. Logically, it is the moment of greatest risk, but it is also the moment in which you will have the greatest profitability if the startup ends up working. Also at this stage the valuation is lower, therefore for the entry you are entitled to more capital. In this period, only people from the entrepreneur’s radius of influence invest, or investors called ‘Seed Investors’.

Currently, thanks to ‘Equity-Crowdfunding’, a new type of investor has been appearing, the so-called ‘Investors in Seed Capital or Seed Investor’, which are being of great help for the development of new startups.

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Phase 2 Investors: Business Angels

These types of investors invest from the moment the company already has a defined Business Plan until the first recurring sales arrive. They are qualified investors, and they do not finance but invest. For every money they put in, they want to get three, four, or more. They can be financial investors or get involved in the management of the company, providing contacts and talents, it is the so-called ‘smart money’.

Phase 3 Investors: Venture Capital

These types of investors are already venture capital funds that invest from the time the company has consolidated sales until the profits arrive. They are key investors, they will be your travel companions until you build a successful model that generates sustained profits. The demand on the part of the investor is constant and they usually get involved in the management of the model.

Phase 4 Investors: Private Equity

These types of investors are large venture capital corporations that invest from the first profits to the strong growth stage. After this stage, the company is already fully consolidated, generating profits and the next approaches are usually an IPO, sale to a larger company, etc.

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