Before a start-up can get up and running it will require early stage investment. This is the very first initial investment before anything begins at all.
There are several types of people involved in this phase of investment. These are basically the people who provide the initial funding that start-ups need to get things going.
They can include angel investors (Or groups of Angel investors), venture capitalists and high net worth individuals. Bank loans and money from friends and family can also count as early stage investment. These investors will usually contribute between $25,000 and $500,000 into the business – although they can contribute more.
Early stage investment is also more than just about money. These investors often have specialized knowledge about the industry, experience and contacts which the start-up can take advantage of. What’s more, a lot of the time these investors will take positions in the start-up or sit on the company’s board and provide advice.
Most often these early investors are speculators. They are basically gambling and investing in the hope that the business is viable and can actually become a success. Usually new start-ups will take a long time to get up and running and often these investors will have to wait years before seeing a return on the funding they have provided. Most of the time start-ups fail which means that these investors are usually taking an enormous risk.
This is why the key to getting early stage investment is to have a good business plan. It’s important that you have a sound outline which describes your business concept in order to receive adequate funding from early stage investors.
Early stage investment is also known as seed capital. It provides the start-up with just enough money to get off the ground. And if the business is actually viable, if it can successfully get going then the investors will move into further rounds of funding such as series A, B, C and so on.
These early stage investments serve several purposes. They can be used to hire the first staff members or to set up office space for the business. They can also be used to pay for research and development or even production of the start-ups’ products. Anything that the start-up initially needs such as market research, advertising or developing products will be paid for with early stage investment.
Early stage investment basically ends once the start-up has proven their business concept or reached the stage where they have become profitable and self-sufficient. At this point, they have qualified as a possibly successful start-up and will receive further investment and rounds of funding.
If you’re an entrepreneur this early stage investment is absolutely critical. Usually entrepreneurs will not have the required funds to get their business started. They usually only have a bare bones idea. This is why it’s absolutely necessary that they receive this early stage investment so that they can pay for what is needed to get the business off the ground.
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