Investments 101 for Startups – by: Sutter Law
When your big idea with a small budget needed the extra boost to get to the marketplace, you figured it was time to take the next step. Your business plan: go big or go home. So far it has panned out well, as your wallet is so full you need an accountant to carry it for you, and you want to reinvest those earnings back into the future of your business.
Speed Capital
This is speed capital, a small but often risky investment from the pockets of company founders, accredited friends, and accredited family. Think of this investment as everything needed to nurture a seed into full bloom (yes, it’s corny—maybe it’s a seed of corn we’re nurturing here). Seed capital covers the gamut of all expenses needed to start your business before you bring in revenue, hence the risk. However, for those willing to take this leap of faith, the payoff can be immense. Nonetheless, this is still an investment, it involves Security & Exchange Commission rules and therefore you should have a business attorney.
Angel Capital
Though similar, be careful not to confuse seed capital with angel capital, in which accredited investors provide a capital investment with a targeted goal of company success. This money is intended to ensure the progress and reach of your grassroots enterprise rather than simply to increase the investor’s profit; it is an investor backing the entrepreneur more so than the company itself (yes, this is most likely the category into which your mother will fall).
Venture capital
So you’ve taken the hammer to your piggy bank and have seen your former hobby take its first steps as a full-fledged business; your risk paid off, and you’re not the only one who has noticed. Queue the investors, as the growth potential of your business, has been deemed worthy of their funds. This venture capital is a crucial asset to businesses without access to large capital markets. This money coincides with the technical know-how and managerial savvy of a group of experienced investors or firms, but this often comes at the expense of your complete freedom in managing your company; because they have a stake, they have a say.
Yes, starting a business is expensive, and yes, the occasional schmoozing required may reminisce the
carefully worded monetary requests from mom and dad that marked adolescence, but money is but a
detail standing between you as a dreamer and you as a successful entrepreneur. So make your mother
proud and fuel the start of accomplishing some career dreams, capitalizing on capital, and starting a business. If you have any questions about investments please contact one of our business attorneys at Sutter Law.
