So you have come up with a business idea that you think will be a big hit and has the potential to make lots of money. The only problem is, it costs money to get an idea off the ground and you don’t have that kind of revenue yet.

But that’s what investors are for! However, you don’t just want to make a deal with whoever is offering money.

An article from Forbes earlier this month examined this dilemma, and how you need to look at the different types of investors to find the one best suited for you.

New Investors

This classification is pretty straightforward. They are less experienced, likely have less money to provide, and won’t be able to give you as much seasoned advice.

However, they can also be some of the easier investors to approach due to those same reasons. In fact, many new investors might even come from convincing family or friends to take a chance on funding your project. So this category of investor can be helpful in getting the ball rolling.

Accredited Investors

Accredited investors account for the majority of the investors that people wind up using. These are individuals who either have a net worth exceeding $1 million or have an annual salary exceeding $200,000.

Their accredited investor classification also allows them to invest in unregistered securities, which startups often are. However, accredited investors are knowledgeable enough to also be a tougher sell for ideas.

Qualified Purchasers

This category is similar to accredited investors, except their eligibility is determined by how much they already have invested in other projects. The dollar amount is also significantly higher, as they need to have a portfolio with over $5 million invested.

That means they likely have the experience to be able to guide you with sage advice, but could also have difficulty finding as much time for you due to their other projects.

“Some of our clients are business builders who raise capital from different groups,” says Fred Hubler, CEO and Chief Wealth Strategist for Creative Capital Wealth Management Group which offers retainer-based advice and access to accredited investments.

“Matching the investors with the start-up is part art and part science. There is a personality aspect as well as risk-return aspect,” continued Hubler. “At the end of the day, the founder needs to make sure they are properly disclosing the risk, return, and lack of liquidity so that both parts can be on the same page.”

You should definitely consider all the investor categories, but be aware of the pros and cons of each. Ultimately, your decision should hinge on your feeling about interacting with that specific investor and the trust they have managed to instill in you.

Want more pointers on finding the best investor to work with? Get some more ideas from the article from Forbes here.

_________

Want to know if you’re on the right path financially? CCWMG’S Second Opinion Service (SOS) is a no-obligation review with one of  Creative Capital Wealth Management Group‘s Wealth Strategists. 

It’s simply not possible to get a reliable second opinion from the same person who gave you the first one. Click here to schedule an SOS meeting with Fred and his team.

.

.

.

.