4 types of investments

A retail investor, he must know the different phases of investment that companies undergo. Not each and every, but almost all companies.

The first ones are from the founders. They muster their hard-earned money or money in exchange for some obligation to build the company. Actually, this is the initial investment and the best part is they can take as much as share they want. If it is founded by a single, he owns every share at the initial stage. But as the company grows, like any other company, it requires money for its future growth. So what the founders and chiefs of the company do this time is that they go to an Angel.

Angel investors are the second-term investors backed up by their own money. This looks closely to each and every corner of the business and after a lot of obscure examination, they either accept or neglect the offer. If they’re to invest, they will do so by pledging share in return. Since the company is still at its initial stage, the ‘angels’ will get a large number of shares for the least money. This will generate a multi-bagger return if the company is about to outperform the industry.

Next comes the big VCs. These are giant corporations that invest a large amount of money. They only invest after the company proves that they can stand and progress efficiently with their current management and system. These instructions do take risks, but not like betting at the initial stages. Even though they pour money, they won’t get the same amount of shares they desire. Because the company is more valuable than before and the responsibilities and obligations are more than before.

Even from big VCs, sometimes companies might face financial challenges that lead them to go public. Going public can be a game-changer. By going public and raising investment from them, it is going transparent. It must show its activity from very minute one to major ones. That’s the rule. Going public also determines the reputation. A retail investor could only buy at this stage.

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