Many new business owners ask whether they should choose an angel investor or venture capital financing. There are a few factors that need to be taken into account, but fortunately there?s usually a clear answer to what a new business needs.
- It?s important to have a business plan that highlights the capital required to start your business. With this you can work out the investor you need. Angel investors will only finance sums of money under $3 to 5 million, whereas venture capital funding will offer over $5 million.
- Your business plan will also need to display the number of years before an option of exiting the deal. If it?s a small term plan then your best option will be angel investor who will allow an exit after 2 to 5 years. Venture capital will lock you in for over 10 years.
- There is also a company value that needs to be met at the time of a contract exit. Venture capital funding will far exceed the angel investors and depending on the contract, there may be a $50 million difference.
- The larger sums of money invested will mean more control of your business. If you don?t plan to relinquish control of decisions then the angel investors will be a better option. They may make adjustments, but with venture capital funding investing more they will almost always require full control.
For more information on starting a new business contact Winflow Financial Group.
Source: http://www.winflowfinancial.com/blog/2011/06/angel-investors-or-venture-capital/
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