Find the right investor for your business

Friends and family are often the first investors in most businesses. They may or may not take equity and may be willing to invest even when there is little or no base for a calculated investment decision. These are people who know you, trust you, believe in your abilities and vision.The investment amount they offer may be comparatively lower (~$1,000 to $200,000) but it may prove to be extremely useful for your business to release an MVP (Minimal Viable Product) or a prototype into the market.

Important

• It is important that you communicate to them the risks of investing in an early-stage company. Preferably ask only those friends or family members who have high disposable income.
• Remember that personal relations will now include business - choose individuals you can manage a business relationship with.

Angel investors are wealthy individuals looking for an alternative investment to invest their spare money. Angel investors can be reached either online through emails, social media etc. or offline through networking events or through introductions from other startup founders.

Angel investors aim to earn good profits when the startup prospers. At times, they may also invest out of personal inclination towards a certain cause/industry. Besides the monetary help they provide, you can also rely on them for business guidance and networking opportunities.

Angel groups have been rising slowly in popularity and numbers. These are multiple angel investors who work together as a group to invest with larger check sizes and lower risk exposure.
However,  since angel groups are composed of multiple individual angel investors, their approvals and evaluation generally take longer and maybe comparatively more stringent.

Important

• Angel investors have a better understanding of the risks involved and are more experienced than ‘Family & Friends’ who invest.
• Understand that Angel investors may also invest due to other factors than just the financial upside of your business, so tailor your pitch accordingly.

Incubators and accelerators can be thought of as programs/ecosystems for startups to shape and grow. If selected, you may receive a seed funding of anywhere from $10,000 to $125,000 to shape your idea and gain market traction.

Both incubators and accelerators support businesses beyond funding. They provide an ecosystem that includes infrastructure, advisory, manufacturing aid, training, networking and guidance. If successful, through them, you can also get an opportunity to pitch to larger investors.
View 10 best start-up incubators in Singapore

Important

• Incubators and accelerators are preferred by many entrepreneurs over angel investors as the value add they provide are way higher comparatively.
• Remember, incubators and accelerators provide the ecosystem, but you need to make the most out of it. Expect support and guidance, not handholding.

Family offices are increasingly being drawn to the advantages of investing in startups. They invest funds on behalf of high-net-worth individuals or their extended families. Family offices and angel investors work in a very similar manner but family offices are usually less specialised when it comes to startups.

Important

• Family offices generally operate faster and with more flexibility than traditional investment firms due to the absence of a formal mandate or an investment committee.
• Try to find a family office that has some experience or expertise in your industry and can help you with building networks and relationships in your domain.

Venture capitalists/Venture capital firms are the big players in the world of equity financing. Unlike other investors mentioned higher in the list, these firms are dedicated to generating returns for the limited partners (LPs). Besides the financial investment, VCs provide guidance and direction to the companies they invest in. They also take an active part in the decision-making process.

Venture capital firms invest across various stages of the business growth right from Pre-seed to Series D:
Pre-seed/Seed: These venture capitalists/firms make one of the first investments in a company. They evaluate the team, product, or market and invest in hope of generating massive returns.
‍Series A / Series B: These investors generally invest in companies that are generating decent revenues and have successfully found the product-market fit.
‍Series C/Series D: These venture capitalists/firms are looking for companies in the expansion or growth stage i.e. companies eyeing an IPO or major acquisition. They have deep pockets and write huge checks in huge companies.

Important

• It is important to find the right investors for your business. Use our database above to find the right fit. Filter using locations they invest in, the industry they invest in and the stages they fund at.
• The venture capital fundraising process can be extremely intimidating and cumbersome. Keep things organised, be efficient and most importantly be thorough with your business plans and vision.
• Be prepared for rejections, less than 1% of companies who apply succeed in securing venture capital.

Corporate investors are nothing but bigger corporations who have capital funds that they invest into startups which may prove beneficial to them in future. This is also known as ‘corporate venturing’. One such example in Singapore is Singtel.

In such investments, beyond the equity, corporate investors also use the groundbreaking idea, innovative technology, or fresher minds from the startup to diversify assets, support their growth numbers, fend off industry changes, and increase revenues. It may happen that the corporate investors acquire the whole startup later if the partnership is fruitful.

Important

• A corporate investor may only invest in ideas that align with their growth plans. If your business idea is not beneficial to theirs, regardless of your profit potential, they may choose not to invest.
• The thought process of an entrepreneur/founder is very different from that of a corporate investor - It’s important for both to understand and respect each others’ opinions to be successful.

Becoming increasingly popular over the last few years, thanks to sites like Kickstarter and Indigogo etc., crowdfunding is one of the investment options startups can now look at. It allows you to receive small amounts of money from a large number of people without necessarily having to dilute your equity. There are 4 types of crowdfunding in Singapore:
-- Reward-based crowdfunding
-- Donation-based crowdfunding
-- Equity-based crowdfunding
-- Lending based crowdfunding (Also known as Crowdlending or P2P lending)

Important

• This may be more suitable when you are raising initial capital to get your product/service launched in the market.
• This is a more digital approach to investment, whereby you list your idea online and people invest in them online compared to one-to-one pitches which you conduct with other investors.

Top crowdfunding Sites in Singapore:Kickstarter, Indiegogo, FundedHere

The Singapore government, in multiple ways, provides support for the growth of startups in the country. These include multiple grants, tax incentives, loan and insurance support as well as financial investments. You can access the complete list here.

Important

• Government programs may come with certain restrictions and limitations, you must review very carefully what those restrictions and limitations are before.

Taking a loan from a traditional bank is one of the most common ways for financing a business. A large number of entrepreneurs prefer debt over funding by an investor as it doesn’t dilute their equity. This kind of financing is often useful for startups who want to kickstart their business before securing larger funding.

Important

• Getting a bank loan may require you to have a consistent stream of income and/or keep collateral at stake for approval.
• This stream of financing requires regular re-payments of instalments immediately post disbursement regardless of how the business performs.

An interesting alternative to taking a bank loan would be to consider a virtual card with credit limits from Aspire. Receive up to 50% of your monthly revenues as the credit limit, use it for 51 days without any interest, post which you can use it at an additional interest. You also get more credit as your business scales. Apply for a virtual card and a credit line

Like crowdfunding is a direct alternative to investment from family and friends, crowdlending is a direct alternative for bank loans/new-age lenders and debt-based investing. Crowdlending also called peer-to-peer lending (P2P lending), is where entrepreneurs get loans directly from individuals through online platforms in exchange for repayment with an amount equivalent to the principal amount they have lent plus an interest in lieu of the risks associated.

Important

• If you are interested in debt funding but can’t get loans from traditional banks for some reason, Crowdlending platforms can be a good alternative for you.
• The loan amount on such crowdlending platforms generally range from $1,000 to $40,000 and can be repaid in 36 months.

Top crowdlending sites in Singapore: Moolah Sense, Funding Societies