How venture capitalists raise new funds

Equity: cornerstone for starting a business

Equity: Business angel, start-up fund, etc.

For the majority of founders, their own savings are often the cornerstone and the only resource for financing their business start-ups. However, if additional money is required, the question arises as to how and under what conditions additional capital can be obtained for your establishment or your start-up.

There are basically two variants that you can check for your financing: equity and debt.

Borrowed capital

Borrowing means getting money on time. The creditor, e.g. the house bank or the development bank, provides capital, for example in the form of a loan. In return, the lender demands interest and the timely repayment of the capital at a predetermined time. Lenders tend to be more risk averse than equity providers, as they only benefit from the interest paid. For this reason, it is usually difficult for start-ups to find lenders.

Equity

Opposite the borrowed capital are the equity providers, such as business angels. They do not require a fixed rate of interest or a specific repayment date. By participating in the company with equity, they become co-owners and therefore benefit from a positive course of business. Equity providers usually have a say and often bring their know-how to the company.

There are a number of possible sources of equity that come into consideration when starting a business, such as convertible loans, venture capital or crowdfunding. It is important that you first inform yourself sufficiently about the respective variant for equity so that you can then weigh the advantages and disadvantages.

We also provide information on where to find investors and how you can convince them with a pitch deck.

Bootstrapping: starting a business with only your own money

The Anglo-Saxon term bootstrapping denotes what is probably the most ambitious form of equity financing: it is about setting up a business that can only be managed on its own. Here you can find out what should be considered with this equity financing, for whom a bootstrapping strategy is suitable and where the opportunities and risks lie.

Equity through friends and family

Family members and acquaintances often support the founders by providing equity capital for starting a business. Caution is advised here, however, as this can also result in a liability claim. It may be advisable to arrange a loan.

Accelerator: support and equity to get started

Accelerator programs are often very limited start-ups for start-ups that are organized by venture capitalists or companies. The focus is not on the allocation of capital or support with equity, but on support with infrastructure and know-how. At the end of the accelerator program, there is often a pitch with the idea in front of investors. We have put together a number of accelerator programs for you to search for equity

Incubator: a strong, long-term partner

An incubator combines elements of a business angel and venture capital companies and accelerators. In addition to equity financing, the incubator also provides the start-up with operational and personnel support. Incubators are often referred to as company builders, as the company is developed together. Read here which incubators support start-ups with equity.

Convertible loan

The convertible loan is an interesting hybrid between equity and debt capital. Especially for companies that need money quickly and easily. Here, a private investor shoots money into the company and converts it into company shares when it expires. If the start-up can pay off the investor, he pays back the loan with interest.

Crowdfunding & crowd investing: Equity from the crowd

Crowdfunding and crowd investing represent a completely new and interesting way of raising equity capital for business start-ups.

Crowdfunding is about a relatively small amount of equity, but you don't get a new co-owner. With crowd investing, on the other hand, the crowd provides equity in the well six-digit range, but also benefits from the positive business development. Special platforms will help you to raise equity via crowd investing.

Business Angel: Private equity provider

A business angel is a wealthy private individual who has equity stakes in a young company. In addition to contributing equity, a business angel usually supports the young company with know-how and its network. Equity for larger financings is often raised by several business angels in a so-called club deal. Business angels are often organized in networks.

Family Office: Equity from wealthy families

A family office manages the capital of extremely wealthy families. A few of these wealthy families also invest in start-ups. A family office is therefore a special kind of business angel. Finding a family office as an investor for equity to start a business should not be easy. However, once you have found a wealthy family as a co-investor, this can open up completely new opportunities, because the network of family offices is usually extremely strong.

Private Equity: Professional Equity Capital

The Anglo-Saxon term private equity describes investments (primarily equity) made by professional investors in unlisted companies. The field of action of private equity is enormous. Investments are made in companies in the start-up phase (so-called venture capital), in the growth phase, but also in companies that are in a crisis and are looking for capital for the turnaround. The investment sums are particularly high for buyouts (MBO & LBO).

Anyone considering a participation by a private equity investor should find out about private equity and possible new co-owners in advance.

Venture capital: venture capital for your start-up

Private equity describes the participation of professional investors in a company. As is customary in the industry, investments are made through a fund. A sub-form of private equity is venture capital, which is relevant for start-ups, in which professional investors invest in companies in the start-up and early phase with equity. In the case of venture capital companies, a distinction can be made between three different types of venture capital investors.

High-Tech Gründerfonds: VC for high tech

The high-tech start-up fund is a special form of venture capital. The high-tech start-up fund primarily supports young, technology-oriented companies with equity. In addition, the fund provides a strong network and offers entrepreneurial support.

Media for Equity: no equity, but an advertising budget!

Instead of an investment in the millions in the form of equity, advertising services are the focus of the Media for Equity participation. In return for shares in their company, start-ups receive extensive advertising services on TV, radio or in newspapers. This is particularly interesting for start-ups that already have a large advertising budget and have to generate reach quickly: more about Media for Equity.

Grants: special type of equity

A special type of equity are grants that are used to promote business start-ups. Although the amount of the subsidy is usually relatively manageable, it does not earn interest and often does not have to be repaid. You can do the funding check to find grants.

Events for startups

Business angels and venture capitalists are often difficult to access for founders and start-ups. There are numerous events across Germany to make contact with investors easier. We have put together an overview of the events from Hamburg to Munich where you can meet investors, other founders and valuable partners looking for equity: Events for start-ups.

The elevator pitch: this is how you convince investors

You have an elevator ride to convince the investor of your business idea and to win them over for the start-up financing ... that is the concept of the elevator pitch, which is often used at events, so that start-ups stand in front of investors can present from 3 to 5 minutes.

Corporate financing: ratio FC / EK

In connection with the financing of a business start-up, the question often arises of how much equity should be raised in relation to outside capital; it's about the right corporate financing.

If you want to attract an equity provider, you need a convincing business and financial plan! A start-up coach will help you and ensure that you are optimally prepared - use the sponsored start-up coaching for this.

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Author: Für-Gründer.de editors

As editor-in-chief, René Klein has been responsible for the content of the portal and all publications by Für-Gründer.de for over 10 years. He is a regular interlocutor in other media and writes numerous external specialist articles on start-up topics. Before his time as editor-in-chief and co-founder of Für-Gründer.de, he advised listed companies in the field of financial market communication.