Seeking funding to grow your DTC business? What’s the right type of investment for your business?
Fundraising and navigating potential exits can be time-consuming, stressful, and confusing for founders.
98% of companies and a quarter of the US economy are controlled by private markets. (PitchBook Data)
There can be significant differences between private equity and venture capital when raising and exiting startups. In addition, there are far more opportunities for fundraising and exits than in the past.
Additionally, different capital sources are playing a larger role, and the various players are shifting how long and at what stage they desire involvement.
5 Investments Strategies Demystified
1. Private Equity
Traditionally, PE investors have focused on companies at a more mature stage in their growth lifecycle when revenues have been established. They will expect a good amount of solid data and due diligence to decide on it, and they prefer predictability and lower risk, even if it means lower returns. Rather than being an early seed investor, PE is more likely to be your end game or at least a great part of your exit as a startup founder.
2. Venture Capital
VC firms typically take much smaller stakes in businesses than their private equity counterparts because they are investing at a much earlier and riskier stage. They, too, will require due diligence and data to make a decision. VC tends to spread their bets across more companies to hedge bets. However, more are starting to participate in earlier funding rounds as they gain experience and as competition grows.
3. Angel Investors and Incubators
This category of investment is more likely a fit for early-stage startups. Investors are willing to participate in the initial rounds of funding because they’re betting on you as an entrepreneur or an idea rather than historical data and profits.
4. Family Offices
These investors differ from the others because they provide more patient capital but seek more cash flow in the short term. Or seek cash flow. Investment from Family Offices is on the rise.
For the most efficient and effective fundraising process, be sure to define the –
- Your short and long term goals
- Evaluate where your business is on the growth path to select the right investment partner for your unique needs
Different partners will provide different benefits at each stage of maturity. One size does not fit all.
Interested in chatting more about preparation for raising your funds? DM us!
