In the world of finance, Funding & Investors are the term used for those involved in the process of obtaining funding for a business start up or other type of venture. This can also be a confusing term to the novice investor, as many people are under the impression that investors own shares of the business. It is true that they do, but it is only one small component of the capital needed to launch and grow a new company. The term, Funding & Investors, are really an umbrella phrase that encompasses a variety of different projects and activities. The activities covered include:
When it comes to the role of the investment banker, the funding & investors manager, he is responsible for ensuring that investors receive proper value for their investment. While this general responsibility is shared among a number of different executives, in most cases the investment banker works alone. There are some instances, however, when a funding agent may serve as an owner of the business.
As an angel investor, you are usually considered a partner by the company you are funding. This means you will receive a percentage of the equity capital (which often represents 70%) and receive regular reports on the business’s performance. As an angel investor you generally have no obligation to share profits with your partners, although they are generally expected to use their investment in the business in a way that benefits you as well. As such many angel investors choose to keep their ownership shares private.
Private equity firms represent the largest segment of funding, with over half of all venture capital funds raised going to these types of firms. They are not-for-profit enterprises, and their primary function is to invest in businesses that are not publicly traded. For-profit companies almost always require the services of a third party investment banker, as do many smaller companies that are seeking additional financing. These for-profit companies usually provide the means for their investors to receive returns, but they must also meet a strict set of guidelines as it relates to their involvement in the financing of the business.
The third type of investor is institutional investors, which include mutual funds, pension funds, and the likes of banks and insurance companies. Most of these investors have a direct relationship with the companies they fund and typically get their share of profits from the companies they invest in. Because of the inherent risks involved, institutional funding may come at a higher cost than most other sources of funding, but their large size allows them to exercise greater control over how their money is invested. They can also be more willing to take a risk on a new startup company that has a great chance of becoming successful.
Most entrepreneurs need both funding and investors, especially during the startup phase when there is typically very little money to invest in the company on its own. To meet both needs, several new businesses are looking to raise both capital and investors at once. In either case, it is important for entrepreneurs to remember that most angel investors have limited experience in the technology or business field, so they are not the best qualified to decide which companies are likely to succeed and which are not.