An investor is a person or institution, a natural or legal person, that invests in a business.
Do you want to know more about other financing options? Since October 2016, SMEs and freelancers have the right to a rating financed by the banks. Read more here.
In general, it lends funds necessary for the development of the economic activity of the company. This action occurs to make a long-term profit.
Types of investors
We can split Investors according to three aspects of the investment: origin, time, and magnitude.
Depending on where the capital or money invested comes from, we can illustrate it between:
Private investor: Private investor is an individual or institution to obtain profitability in most cases.
Public investor: Public institutions of the Administration that seek a social interest are generally the objective of philanthropists or the development of a project.
If we analyze the investment according to time, there are two types of investors:
Long-term: They focus on stable and lasting operations, revalue the business, and obtain dividends if the company is on the stock market.
Speculative: In this case, the investment is more volatile, and in a shorter time, it tends to report higher profitability.
On the other hand, according to the size of the investment and the investor himself, it is possible to speak of two types:
Individuals: Regardless of whether they are natural or legal, they usually make small contributions of lower profitability but more stable.
Institutional: Large institutions or investment groups with higher contributions and with a higher profitability objective.
Difference between investor, business angel, and venture capital:
These three concepts work on the fact that there is an economic contribution to develop a business. However, a business angel makes a financial investment and creates his knowledge, his network of contacts, and his experience available to the entrepreneur.
It serves as a guide to making the business profitable for both parties. These are private individuals with private funds, not a group of investors.
On the contrary, a venture capital obtains its funds from other investors. They tend to look for business models in a more mature phase, so the investment is usually less speculative.
Finally, venture capital only makes a capital contribution; it does not usually provide experience, a network of contacts, or advice.
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