Private Investors

• Private funding today represents most of the initial resources given to start-up companies. Given the risk of failure, many private investors require a significant return for borrowing their financial resources. However, because professional private investors can also open doors to connections and further business expansion, they represent a necessary evil that some companies accept to be able to grow.
  
  Amateur private investors frequently provide one or two lump-sum investments in a small venture, but professional private investors can provide a series of investment until the company hits the big time and goes public (i.e. sells shares for public investment).
  
  

Investor Type: Family, Relatives, and Friends

• The smallest of private investors but frequently the first, family, friends and relatives frequently provide the initial funding to help a start-up get recognized as a serious player. These investors often just want to help a dream happen and are not really interested in return profit, as long as the original investment is paid back.
  
  

Investor Type: Angel Investor

• Probably the most beneficial of private investors as a group, angel investors provide business funding to help generate newcomers into a particular industry. The goal is frequently to generate new inventions and players that have ideas or products not already available but need funding to realize their concepts. Angel investors generally avoid wanting to take over a start-up; instead, these private investors are more interest in generating new synergies with existing producers to help industries expand.
  
  

Investor Type: Venture Capitalist

• Opposite the angel investor is the the venture capitalist (VC). These investment players are primarily in the business to make money. The modus operandi tends to be exchanging needed funding for ownership and a controlling stake. As the seedling company becomes successful the VC will then push for it go public. By selling his or her ownership then, the VC gets paid back with significant profit and starts the process over again with a new start-up. To protect the investment, the VC will aggressively be involved in the direction of the start-up and can even force the original owners out if enough ownership is gained with funding.
  
  

Institutional Financers and Lenders

• As an alternative to asking for help from private professional investors, a small business could apply for a government loan from the federal Small Business Administration (SBA). The SBA also provides various programs for mentoring to help success of new businesses. However, competition for these loans is thick, and funding depends on variety of issues, including federal budgets and the economy.
  
  Aside from the government, banks and institutional lenders can also provide business loans or lines of credit, but many lenders practically want a business to already be successful prior to lending to it. Much depends on the business being able to show via financial statements that significant revenue and assets already exist. This is very hard for a start-up to produce when it's not in business yet.
  
  

Public Ownership

• Ultimately, when a company has significant success, it can generate further investment funding by going public or selling ownership shares on the stock market. This requires registration with the U.S. Securities Exchange Commission and similar regulators. A major financial institution will be required to handle the generation of the stock and initial purchase offering. Once finally sold, the company will get a share of the sale, which provides the actual funding available for growth.