Every giant business you see today, from Pepsi, Amazon, apple to Microsoft, was once a startup. In layman’s language, a startup is a newly formed private business. With technological advancement today, everyone is capable of opening their own company. There is a new trend of people exploring entrepreneurship to actualize their ideas and become their own boss.
Numerous people don’t know that running a startup could be more demanding than a 9 to 5 job at a big company. The reason behind startup need for significant attention is that it needs capital and an investor’s help to grow. According to David Azzato, an entrepreneur’s role in a startup is to provide capital and guidance that a newly formed company needs.
What Types of Investments Can A Startup Investor Focus On?
In investments, an investor offers money in exchange for an equity stake in a company. By having a stake in a company, investors have a chance to help grow a company. Additionally, by having a seat on the board, an investor participates in making significant decisions.
Although a stake might be small at the time of investment, the goal is to grow with the company and eventually get more than what you put in. Startup investors take calculated risks by investing in a struggling company, but depending on the management level; they stand a chance of reaping more than what they invested.
There are a number of financing rounds in most companies. The initial round is known as the seed round, and this is where startup investors come in handy. This round is followed by series A, B, and C, where venture capitalists come in. In all rounds, money is provided in exchange for a stake. Equity stake is calculated in percentage, which means that existing members lose a certain percentage of their stake when a new member comes in. The process of giving up some stake is known as dilution. David Azzato reminds entrepreneurs to avoid diluting their equity too much.
A company’s valuation is calculated by dividing the amount invested by investors’ equity stake. When a startup is experiencing tremendous growth, the valuation should keep rising with every subsequent funding round.
What Describes A Good Startup Team?
David Azzato describes investing in a startup as putting money in people behind the startup. Employees are the essential component of a company. When evaluating a team, novice investors should consider personality and skills. It’s imperative to pay keen attention to co-founders’ personalities since they are the people you will work with for several years to come. Read more: https://davidazzato.medium.com/