Starting an Online Business All-in-One For Dummies®, 3rd Edition

Finding the Perfect Investor

Not everyone has what it takes to grow a successful company from nothing or while operating on a shoestring. Or, maybe your business concept requires a significant injection of capital right from the start. If so, you have other alternatives to bootstrapping. The most popular approach is to find an investor.

Investors, either individuals or a group of individuals, buy into your idea and provide the money you need in exchange for stock (or a percentage of ownership) in your business. You can choose from several types of investors; each type comes with its own pros and cons, of course. The trick is to find the best type of investor for your needs.

Turning to your friends and family network

You're probably familiar with the idea of turning to friends-and-family (F&F) network for start-up funds. A major advantage of this strategy is that you have a lot of flexibility in how you structure the terms of the agreement.

The simplest method is to simply ask for a loan. You need a certain amount of cash, and your mom or best friend is happy to oblige. As a bonus, the interest amount on the loan is usually minimal or nonexistent, and the time for repaying the money is open ended — not a bad deal.

An alternative is to take on your friends and family as investors. In other words, you give up a percentage of shares or stock in the business for the amount of money they agree to provide. On the upside, you don't repay that money. However, if you no longer want those ...