Funds are very important to startups as it helps them navigate through growth processes comfortably. Now, these funds are given to them in exchange for some percentages in startup ownership.
There are lots of considerations and factors that play a role in the funding a startup can secure and this includes the industry, growth plans, startup development stage, and the type of investor you want, among others.
Among the startup funding options available, angel investors and sharks are the two most common options almost every founder considers at different points in their startup journey.
Angel investors informally called angels embody their name, they are individuals who invest in startups for equity and still use their network, expertise, and other resources available to them to ensure the startup succeeds.
There are things to note about angel investors, oftentimes they are willing to take on risk by investing in early-stage startups that have not started generating profits and they balance this by diversifying their investment across various startups in different industries.
The sharks, on one hand, are individual investors who invest in startups for equity but must first grill the startup founder properly to ensure that there are high chances of getting a return on their investment.
These sharks are known to drive hard bargains, just to get the best deals. So this means that as much as they are funding the startup, they are just looking for a way to grow their money.
So sharks dig deep into a startup and only part with their money when the startup has met their expectations.
Just like the angel investors, the sharks also leverage their network and expertise to ensure the startup succeeds.
They can also decide to be directly involved in the startup or just take a less active role by being on the startup’s board of directors.
While sharks and angels have similarities, there are lots of differentiating factors between these two types of investors.
The angels invest in the early stage but, the shark invests in startups in the later stage, as they need to prove that the startup has a buying market.
The amount invested is another differentiating factor, the sharks invest more heavily than the angels. A shark investment might run in millions of dollars and this justifies the aggressive, hardcore interrogations which happen before their investments.
Sharks are most likely to fund a startup with higher risk levels for a potentially higher return than angels who often play safe when it comes to risk-taking.
Also, sharks tend to be industry focused on their investments, while angel investors invest in diverse industries.
In conclusion, startup funding can be sourced from either the sharks or angel investors as they provide guidance and mentorship in addition to the funds.
However, care should be taken to evaluate the investors’ ask. Also note that, once investors come on board, founders do not take decisions about the startup on their own.
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