How do I get investors for a startup?
Nowadays, a great idea and willpower are not enough to make a successful business. Lack of capital is one of the main reasons why startups fail.
In fact, the largest companies we know today have also needed financing to get to this point.
So it is common for you to wonder how to get investors who will allow your project to scale until you achieve your objectives.
Let's start, then, by knowing what type of investors exist.
Types of investors for a startup
- The 3 F (Family, Friends and Fools). Friends and family who invest in the most initial phase of your project (pre-seed phase) because they trust you and decide to support you.
- Business Angels. Person with capital and business experience who decides to invest in companies with potential in exchange for shares. They usually enter the stage early-stage (after the seed phase, and before the growth stage (Growth stage)).
- Public financing. Public organizations that invest in the company from its beginnings and throughout its history until it is positioned in the market. Some examples are: ENISA or CDTI.
- Bank financing. Through different tools, banks participate in the startup. Normally, in exchange for shares.
- Revenue based investment. A person who invests in a company in exchange for recovering the amount deposited plus a "capital gain", but without any right to shares.
- Capital Venture. Investors who enter the startup in exchange for shares. Let's look at the latter in more depth.
Venture capital and startups
"Venture capital entities (VC) are understood to be closed-end collective investment entities that obtain capital from a series of investors through a commercial activity whose commercial purpose is to generate profits or returns for investors and whose main purpose is defined in article 9 of this Law."
These ECRs may take the legal form of venture capital companies (SCR) or venture capital funds (FCR) and their investment regime will be as established in section 2.a of chapter II of Title I of Law 22/2014. , of November 12, which regulates venture capital entities, other closed-type collective investment entities and management companies of closed-type collective investment entities, and which modifies the Law 35/2003, of November 4, on Collective Investment Institutions.
In particular, the venture capital funds or private capital pursue investment in unlisted companies, entering their capital with controlling interests, with the aim of transforming them to improve their efficiency and make them grow.
These are long-term investments, but with low volatility in relation to the stock markets.
Once the company has matured, after four to seven years, the fund sells its stake.
Depending on the type of company in which they invest, they may be mutual funds. venture capital (they invest in young companies); expansion capital funds (they invest in companies with great expansion growth); either funds buy out (they invest in mature companies).
The investment may be made in any of the following phases of the receiving company: seed, start-up, expansion, replacement, leveraged buyout or reorientation.
Recent venture capital funds for startups
In the last year, new venture capital funds have been launched in Spain and Portugal with the aim of promoting startups in strategic sectors such as technology, biotechnology, and sustainable innovation.
These initiatives reflect growing investor confidence in the entrepreneurial ecosystem and open up new opportunities for companies looking to expand.
Barcelona Investment Fund
The Barcelona City Council has launched a 30 million euro fund to support startups in key sectors such as the sustainable economy, biotechnology, healthcare, and deep tech.
Its goal is to consolidate the city as a global innovation hub and attract foreign investment.
ICF Venture Tech III
The Catalan Institute of Finance (ICF) has created a capital fundl risk with 40 million euros aimed at technology companies in the growth phase.
This fund is focused on startups that have passed initial rounds and are seeking financing to scale their operations in domestic and international markets.
Bynd Venture Capital Fund III
Bynd Venture Capital has launched its third fund with an endowment of 40 million euros to invest in approximately 40 technology startups in Spain and Portugal.
The firm prioritizes sectors such as artificial intelligence, software, sustainable technology, and innovative consumer goods.
This fund is backed by investors such as Fond-ICO and Caixa Capital.
How to find a venture capital fund for my startup
To search for and select a venture capital fund, you must first (1) locate funds that have demonstrated interest in investing in your company's sector.
At the same time, you must (2) work on the business plan so that it is interesting to them; as well as in (3) exit plan for the possible investment fund.
The best option will be to go to the Spanish Association of Venture Capital Entities to find out which funds invest in our sector of activity.
On their own website we can find a search engine with different filters to perform the search.
To select it, we must assess the different investment and execution strategies that we find, the experience in the market and the incentive system and the relationship between prestige, position and cost.
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[1] This stage is known as the maturity stage, since the product is already consolidated in the market, and the company has a solid structure, business resources, implemented processes and a good market niche.
