Investing in startups: how it works?

The main issue of any start-up is where and how to find the right investor. However, it should be taken into account that investors face the same issue.  So how to find the point where both sides meet up to result in productive cooperation?

  Even the best business idea will face difficulties without funding. Let's figure out what are the stages of financing a startup and how to attract investments for the development of the project.

1. At the first stage it is only the creator and his idea. When the project is in its early stages, it belongs entirely to the creator. The owner invests everything he has, in developing the idea. The company’s value at this stage is rather low and there is no need for investments yet. Cost is just starting to increase.

2. Co-founders. It’s impossible to develop a growing project alone, so a team starts to emerge around the founder. The division of shares depends on the vision of the whole team. Mostly, the creator keeps 50%, and the second half is separated between the partners in correspondent proportions. To avoid future share difficulties, at that stage you should reserve 20% of the project cost for future employees.

3. Friends and family can "invest" in a startup, but at the next stage, the project needs an extended social network or an online B2B platform for the investment industry.

4. Another tool to attract investments is crowdfunding. The creator can search for investments on special Internet sites. The idea is that any Web user can donate money to develop a startup he is interested in, no matter if it is a technological solution, a new device, or a song by an unknown singer. Here we should not underestimate the perspectives of networking platforms again.

   Some large companies have corporate venture studios and can act as actual investors in their own startups. As a successful example of the implementation of such internal investment tools, we can mention the Social Discovery Group. It is a global technology company focused on connecting people through social discovery and designing Social Life 3.0.

   Sometimes, to make an investment decision, you need a push. The matter of inspiration is significant for many investors, so the main thing is to speak aloud about your startup, to make people know about it and its value. Don’t hesitate to make new connections and use new platforms, and the results will follow up, for sure.