Ya-Online-Juegos.com | Startup Company Financing Model – From Seed Capital to Angel Investors to Venture Capital

Resource Author Francisco Rodriguez Higueras
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Contrary to what you are seeing in the press with the credit crunch and looming recession there is simply too much money in the World at the moment; too much capital seeking too few investment opportunities. Remember the 1930s depression created more Millionaires than in any other era (ever) and now will be no different. A large amount of high net worth individuals are seeking to diversify their portfolios away from traditional investments as a defensive hedge against stock market volatility. Historically and in times of recession the two best investment classes that have outperformed traditional markets have been commodities and private equity. So if there is so much capital available in the world today, why is it so difficult to locate the capital you need?

Angel investors/Angel round

As time goes by, the company needs further funding. The 3 founders, though with unlimited passion for their business, have limited wealth. The company is likely to still be in its preliminary stages – not generating any revenue, or with limited sales and earnings – but looks for further growth. It is not attractive enough for venture capitalists yet. This is when angel investors come in. They bridge the gap between seed capital and venture capital.

Health Warning:
Venture capital money is not for the faint-hearted. Too often, it is only for the desperate – unless your desire is to build a business with an exit strategy in mind from day 1. There is nothing wrong with such a goal in the short term, as the returns can be staggering, but expect to make them many – many more millions than your side – that is if you even get that far. A great many other original creators have been squeezed out long before the 'D-day – big pay day'.

Venture capital/Series A financing

Venture capitalists provide venture capital to startup, high growth businesses with a prospect of achieving an IPO within a number of years (e.g., 3-5 years). Venture capitalists generally invest in the form of funds that are privately held limited partnerships (LP or LLC). A venture capital fund is a substantial pooled investment. Such funds may come from institutional investors such as pensions funds, endowment funds, insurance companies, foundations and corporations. Wealthy individuals may also participate in such funds.

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