Investor Service

Most business owners usually depend on their close acquaintances, friends or family to help them by investing in their business, normally during the initial stages. These types of investors are called Friends and Faily or Personal Investors, and even though they can assist with funding, there is a limit to how much they can invest in your company.

It is often easier to convince a loved one to help you out, but there is heavy documentation that is required for which they can be taxed for helping as well. We therefore advise clients that if they are going to take a personal investor’s help, we urge them to ensure that they consult a lawyer to help them avoid any complications.

The best way to understand “friends and family” is to understand what they aren’t. Most often, they aren’t “accredited investors” as defined by securities law. The laws about investing in small businesses date back to the Great Depression in the US and worldwide, when they were written to protect people against stock scams. In the US, it is illegal to take an investor’s money for your small business or startup unless the investor is accredited. At the Clarke Group, we guide entrepreneurs and organizations on how to go about taking money from Friends and Family members to fund their business.

At Clarke Group, we know what distinguishes angel investors from friends and family; the latter is that angel investors are accredited. They meet the securities law requirements of income or wealth to be legally allowed to invest in your business. Unlike venture capitalists that we will discuss next, angel investors invest their own money, not other people’s.

Angels often join groups and invest in groups. They are usually more comfortable investing in the same industry they originally profited from. There’s a huge range with angels in how sophisticated they are about analyzing a business (called due diligence) before they invest, and what sort of terms and deals they’ll take. Most Angel Investors tend to pool tens of thousands of dollars to invest a larger sum of hundreds of thousands of dollars, rather than tens of thousands or millions.

Depending on the successes of angel investment, it often leads to venture capital investment later. The process and thinking of sophisticated angel investors are very much like that of professional venture capitalists.

Having acquired venture funds ourselves, we guide our clients in the process of pursuing and getting financed by Venture Capitalists. A Venture Capitalist (VC) is an investor who offers capital to the startups that are believed to have long-term growth potential. Many of the Venture Capitalists that we have dealt with are normally investment banks, well-off investors, and other financial institutions. Even though this is a risky way for investors to put in their funds, a successful payoff is worth it. We tell our clients that VCs are calculated risks takers because they have come to the realization that the greater the risks, the greater the returns on their investments.

More often, these VCs who put their resources into a company that they feel has the possibility to grow and become profitable, would demand equity in the company and get an overall say in the company’s decisions. Since entrepreneurs get both open funding as well as the advice of an experienced and knowledgeable person, many tend to choose these types of investors. Our VC list is long with success many success stories.

In a VC deal, large chunks of the ownership of the business are produced and sold to some investors via independent limited partnerships which have been built by venture capital firms. At times, these partnerships are made up of a pool of various similar enterprises. For that reason, we tell our clients to be very weary of any sweet deal that may come to VCs.

To sum up things, an essential difference between the other equity deals and the venture capital deals is that VC deals normally focus more on growing companies that are looking for an abundance of funds for the first time. So, if you want a lot of money for your startup, along with some long-term experience and knowledge, this option is a good one.

At Clarke Group, we try to encourage our clients to try as much as possible to stay away from small dollars or Peer-to-Peer Lending investors. P2P Lenders can sometimes lead to chaos or conflict for business executives. Peer-to-peer lenders are groups or individuals who provide capital to small business owners. But to obtain this capital from these type of investors, we often encourage business owners to apply with companies that are experts in peer-to-peer lending, like the Lending Club or Prosper. In most cases, as soon as the owner’s application gets approved by the company, the lenders would then determine if the company is right for their investment or not. P2P cannot guarantee funding for a startup company.

Incubators and accelerators are a gateway to various investors. If you get accepted into any incubator and accelerator programs, you might get somewhere in the range of $10,000 to $120,000 in seed money to develop your thought and gain traction while profiting from extra information and assets. At Clarke Group, we are plugged into a large network of incubators and accelerators in the US, and around the world. Once we have assessed a client’s business venture, depending on the stage of their business, we connect them with an incubator or an accelerator for grooming and possible funding. Assuming everything is working out in a good way, most of our clients will pitch to more prominent investors and will be instructed with subsidizing sources during their demo days that can assist with taking you to a higher level. Be prepared to hustle; these programs need you to grow rapidly heading to the next stage.

These aren’t accurate investors like the others we have discussed and listed earlier. However, these types of investors can be a source of capital. Off the back, we tell our clients that conventional banks are not sources of capital for new companies and independent ventures. In any case, as their business gains a foothold, they might offer business credit cards and advance loans.

At Clarke Group, we have access to government programs that provide grants to a particular kind of project in the US and in other places around the world. Our exhaustive list includes but is not limited to the World Bank, IFC, the Sovereign Funds, and dozens of others. With some of these institutions within our portfolio, it doesn’t imply that acquiring this sort of capital will be any more straightforward, and loans require repayment regularly when you genuinely need liquidity and slack as much as possible. These institutions will not need to surrender value to your organization. Yet, they can affect your productivity, which might show up when you attempt to fund-raise from different investors in the future.

One thing to note about government programs is that they accompany specific limitations and restrictions that might be difficult for new businesses on many occasions. Considering this, founders should survey cautiously about what those expectations are.

At Clarke Group, we have limited numbers of Corporate Investors on our checklist. When big corporations put their resources into a budding business, they have various benefits. This consists of supporting their development numbers, diversifying their assets, and distinguishing between talent and innovation, which can assist them with battling off industry changes and fuel significant profits. Some corporate investors have assets to put resources into outside new companies. Many of these investors are launching their accelerators and incubator programs and building environments for developing these opportunities.

These investors can be great partners in taking their partner’s business to a higher level. However, they can be unique to work with. However, we often warn our clients that any integration or collaboration on sales channels, systems, and customer bases should be drawn nearer cautiously and with a ton of tolerance.

Establishing businesspeople and corporate investors have completely different perspectives and styles. Therefore, we advise our clients to figure out how to see one another and have a few limits set up while going in, in case this is a causal relationship.