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When Do Startups Get to Invest?


How to Get Venture Capital Funding For Your Startup

At Elm, we are wholeheartedly committed to bolstering the values of community partnerships with entrepreneurs in times of emergencies. In line with that, we hosted at our Elm 15th virtual seminar Mr. Ahmed Aljibreen. An investment partner in 500 Startups who shared with us how to draw the line where venture capital and traditional investment split apart. Aljibreen explored in his talk ways in which startups can obtain funding and what trigger venture capitalists to invest in startups.

Venture Capital vs. Traditional Investment

The concept of traditional investment can be defined as the implementation of a commercial enterprise (coffee shops, restaurants, etc.) usually funded by institutions that provide loans such as development banks, or through the principle of investing in shares. The perk of this type of investment is that investors are aware of expected costs and monthly incomes.

On the other hand, venture capital is a form of private equity and financing that companies, institutions, and individuals provide to entrepreneurs to expand their business through funding and strengthen its investment aspects. Here investors are well aware of the difficulty in expecting investment returns.

Ways investors can obtain funding for their startups

Financing your business is the most important factor for startups. Ways in which investors can obtain funding for their business can include the following:

Bootstrapping in which businesses are funded by their founders and profits. One of the benefits of this approach is that business owners can control all business aspects without outside intervention.

Friends & Family Funding.

Funding by angel investors, who are investors who invest a huge amount of money to support startups, and may proceed to support the business during its challenging stages.

Funding by venture capitalists. These investors usually invest heavily in the business.

Essential steps for venture capitalists to take before investing in startups

Venture capital involves many risks, the most prominent of which is the difficulty in forecasting returns on investment and costs as the project progresses and evolves. Thus, venture capitalists have to take some measures before investing in startups, namely:

  • Inquiring about the startup owner in regular conferences and seminars that are held periodically.

  • Filtering suitable projects by conducting financial due diligence.

  • Selecting the project/business to be invested in.

  • Exit strategy.

How can startup owners and entrepreneurs attract venture capitalists?

To draw the attention of venture capitalists, make sure your business contains the following:

  • A unique idea.

  • An exceptional team.

  • Your products meet market needs.

  • Growth potential.