In this blog, let’s explore Angel funding, Seed funding and Initial Public offer (IPO).
The person has an idea start up a new business or an venture as he/she investing their savings to start up the business. Then he/she wants to expand the business for which they required funds. In the first step thus person approaches angel investors with the idea, project report and blue print of a business plan.
Once the Angel investor is impressed with the idea of the business and sees the potential of growth in it he/she agrees to invest in the idea or the small start up.
Who is an Angel investor?
An Angel investor/s are the one who invests in small start ups or entrepreneurs business idea. Angel Investors provide funds once or more during the early stages in difficult times and nurture or mentor the entrepreneurs with their experience to run the business in smooth way.
The funds invested by angels would be in the form of one time convertible debt or in the form of percentage of equity (stake) in the company or business. In the later stages, thus investors can sell it to the business owner or the other interested investors at the premium to benefit from it.
Who is a Seed Investor ?
The next stage of funding is seed funding which is usually the second stage of funding required for the business expansion or for operations. To raise these funds company owner/s or proprietor/s approach seed investors for funding.
The seed investors check the strength, weakness, opportunities and threats (SWOT) for the business and the viable future prospects of the business before investing.
Also seed investors either lend in the form of non convertible debentures (NCD) as debt with fixed rate of interest. Else in the form of equity agrees to dilute with the consultation of angel investors if any they would invest in the business. The seed investors can be venture capitalists, private equity investors or individuals.
What is an IPO ?
The next stage of fund raising arises through IPO which is Initial Public Offering (IPO) in the form of issuing shares to the public. Before an IPO company is considered private, which consists of small angel or seed investors and founders. The public in the other hand includes institutional investors or individual shareholder. The share is offered for sale to the public in the form of face value plus premium.
In the next post of educational series, let’s decode different asset classes Secondary Markets.
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