Inventors and beginner entrepreneurs often don't have enough money to implement their ideas. They seek investors – people who are ready to lend. If the idea of working and giving up part of your profit is unappealing, you can find a partner who is able not only to contribute materially but also to take an active part in the creation of the product, sharing the responsibility, risks and achievements.
|Initial contributions||As a rule, these contributions are made by relatives or friends who see the potential in the emerging business idea and are prepared to take on the risk of loss. The invested capital gives the project its initial boost.|
|Venture investment stage||Wealthy private investors are called ‘business angels’. They can become interested in a startup after evaluating efforts already made, as well as short and long-term plans. They often invest money in return for a share of the company. Sometimes investors end up managing the project directly based on their experience, as quite often they themselves are native to the sphere in which they are implementing the new project.|
The following stages of startups development are marked with the letters of the Latin alphabet.
|A||The company has a full-time, in-house staff, managerial positions for the founding owners and an understanding of its vision and direction. It needs investments to enter new markets, accomplish new sales plans and plug possible cash flow gaps.|
|B||A marker of a successfully developing startup which aspires to become a fully-fledged, serious business. Goods and services become well-known and see strong sales. A change of roles takes place – the entrepreneur no longer pursues investors, but they pursue him.|
|C||The key objective of the startup changes. The company seeks to find a way to dominate the market.|
|D||There is no particular trajectory of development. Perhaps instead of going to the investors, the company becomes public and lists its shares on the stock market.|
Now let's look at the situation through the eyes of an investor who wants to understand who this beginner entrepreneur really is and evaluate the appropriate funding and chance of success.
|Working for a hobby||Such entrepreneurs turn their hobby into a source of income and work only for themselves. Examples of this could be a qualified coder from Silicon Valley who simply loves programming, which is why he writes code for a living, or a California coastal surfer who teaches his craft to pay the bills, so he can carry on riding the waves.|
|Small business to support a family||Homeware stores, hairdressing salons, travel agencies, online stores and builders are just some examples of small business ownership. Such companies usually have a decent revenue and as a rule are not designed to grow. They do not require investment because their founders value their status as the sole business owner. Small entrepreneurs' finances are limited to personal savings and loans from relatives and banks.|
|Born to grow||Status is ingrained into the objectives of Silicon Valley entrepreneurs and their investors. Google, Skype, Facebook and Twitter are only the latest examples of ventures whose founders believe that their vision will change the world. Their main goal is to get a share in a public company and sell stocks, demand for which will bring multimillion dollar profits. Growing companies require large capital investments and are always on the hunt for a business model capable of guaranteeing growth. As soon as they find it their efforts concentrate on rapid growth, which requires even more investment.|
|Startups for sale||Developing a web or mobile application requires little time. If you have a good idea and some money from relatives and private investors you can create a product and find a niche in the market. Such companies are, as a rule, sold to larger ones and their founders and investors are content with millions rather than billions.|
|Social startups to make a difference||Socially minded entrepreneurs want to make the world a better place instead of cornering the market to enrich their shareholders. Such companies can be non-commercial, commercial or a combination of both.|
|“Innovate or die”||Large companies are created according to this principle and concentrate their efforts on increasing efficiency and optimising expenditure. It is not enough, however, to concentrate only on improvements to the existing business. Any corporation has to contend with external threats and innovate if it is to survive and grow.|
Every type of startup has financial objectives and strategies for attracting finance. It would be incorrect to look at startups as smaller versions of large companies. The latter implement proven business models, while startups are temporary organisations designed to locate a transferable business model capable of growth.
We conduct market monitoring and develop new commercial products: applications, websites and services. At EDISON we are happy to discuss new projects to implement profitable products together. We especially value the emergence of promising ideas among staff members: we are willing to invest not only in ideas but also in the development of their creators.