By Jack Thorne Professional venture capitalists are often thought to be the primary source of investment in start-up and early stage ventures. Recent studies completed by the U.S. Small Business Administration and the University of New Hampshire, however, indicate that at least ten times as much investment capital for young companies comes from private investors. Unfortunately, not many companies can demonstrate such returns. Second, there are, simply, many more private investors than venture capitalists, and they are distributed more evenly around the country. The answer is probably closer to home than you might think.
Many companies find their initial investment capital through friends and family.
These are people who know you and want to see you succeed. Because they are betting on you, their perceived risk is typically low, and they may be fairly flexible on repayment terms. Even if you are convinced that nobody you know has money to invest, make a list of family members, former classmates from high school or college, neighbors, and business contacts. While none of your acquaintances may be willing to invest themselves, they may have access to other potential investors. Network building is a powerful tool.