At first glance, investors in start-ups may look the same. But understanding the different types of investors will help you understand the start-ups investment ecosystem. There are several categories of investors participating in the Early-Stage rounds (initial phases). The most common are:
Customers include existing and potential users of the product or service being launched. These investors tend to have a strong knowledge of the launch of the product or service, and their close relationship with the business can turn them into fans, advocates and brand ambassadors.
There are many professional investors in different asset classes that end up allocating a part of their investments to the alternative market, and more specifically to START-UPS. The reasons are very diverse, but the reality is that, in recent years, this has been a growing trend. The wide, diverse and interesting range of start-ups available in which to invest has made many regular investors in other assets find themselves in the dealflow of start-ups in Spain.
A Business Angel is a private professional investor who invests their own capital in early stage companies seeking to add strategic value to the start-up through their knowledge, advice, network of contacts and experience (this is known as “smart money”) . Most commonly, they actively invest in multiple start-ups.
A group of Business Angels, as its name suggests, is a collection of Business Angels that meet to listen to presentations, discuss investments and/or invest together.
Venture capital firms invest funds in start-ups on behalf of the fund's investors. The firm may have Limited Partners who invest the funds and General Partners who manage the funds and make investment decisions. Within these, there is a diverse mixture depending on the investment phase, the amount to be invested, and the management models.
Some large corporations may choose to make investments in early-stage companies through a corporate venture capital division. These investments are intended to provide a strategic advantage in the corporate industry by acquiring emerging technology and talent or to diversify the interests of the corporation.
A Family Office invests funds on behalf of high net-worth individuals or an extended family of people with high net worth. Family office funds can be managed by a multi-ownership office that manages funds for several family offices, or a single family office that focuses on a single family or self-managed by a family member.
Registered Investment Advisors are financial professionals who manage investment funds and financial decisions on behalf of high-net-worth individuals. Some invest in start-ups because their clients are interested in early-stage investments, or at least allocate a percentage of their funds to this type of investment.
We have streamlined the investment process to work effectively for all types of investors, regardless of their objective. The feedback from Fellow Funders’ investors is given for various reasons, but some we have received is:
> Search for direct investments in this risk asset class
> Search for co-investment with other investors
> Search for investments online—time is precious.
> Search for diversification of conventional investments
> Add additional dealflow