Private Investors and Equity Finance

Document Sample
Private Investors and Equity Finance Powered By Docstoc
					Private Investors and Equity Finance
Private investors provide equity finance for business opportunity. They
invest money into new and up-and-coming businesses; they have no
preference in the industry sector that they invest in as they have a wide
range of interests.
Private investors bring money to a business that is needed to move the
business forward. As well as bringing in the required funding to get a
business off the ground, a private investor will also provide your
business with the skills and contacts that are needed to help your
business progress.
2008 has, so far, not been extremely rewarding for private investors,
which is why it is so important that you explore investments which are
well positioned for a longer term favourable theme rather than those
dependent on a highly unpredictable economic cycle.
With private investors some investors will invest passively, which means
that after providing a company with the finance needed they will play a
limited role within the company. In cases such as these the investors are
usually professionals in medicine, law, real estate etc. Other investors
however will want to be increasingly involved and will use their network
and experience to drive your business. They will also want some type of
control with business decisions.
When it comes to getting the help of an investor it is important to know
that private investors have more confidence investing with people that
they know so the fewer degrees of separation equals a greater chance of a
deal being done. Before any deal is made it is important that you decide
on the amount of capital needed as investors won't be interested in guess
work; they will want specific numbers.
The most common type of private investors are angel investors, otherwise
known as business angels. These angel investors hold extremely high risk
and require a very high return on investment. Due to the fact that a
large percentage of angel investments are lost completely when early
stage companies fail, private investors seek investments that have the
potential to return at least 10 or more times their original investment
within 5 years, through a defined exit strategy, such as plans for an
initial public offering or an acquisition.
There are many different ways to describe private investors; they have
many names attached to them such as venture capitalists and business
angels. These private investors are often retired entrepreneurs or
executives. They can provide your business with valuable management
advice and important contacts. Private investors are wealthy individuals
who invest in high growth business.
Private investors are growing to be one of the most popular ways of
gaining business finance. This is making equity finance overtake debt
funding as the best way of funding your business. Private investors are
really worth looking into if you are hoping to start your own business.
You do however have to ensure that you have your business plan wrote to
the highest standard if you want to attract the help of private investor
as they will use your business plan to see if your business has a high
chance of being successful.
Helen is the web master of ARCH Entrepreneurs, specialists in all aspects
of Private Investors.
Please feel free to republish this article provided a working hyperlink
remains to our site