How should I convince a startup investor that he should invest in my idea? originally appeared on Quora - the knowledge sharing network where compelling questions are answered by people with unique insights.

Answer by Alexandra Isenegger, founder and CEO at Linkilaw, on Quora:

Venture capitalists do just that - invest in businesses. However, if I were you, I would try to stay away from VC funding in your first round of investment. There are many reasons for that, but my main reasons are: maintain more control over your business, don't give away too much equity, and get some prior investor experience before approaching VCs.

Quite an easy way to segment the different sources of venture funding that are available for your start up could be done by separating them depending on the stage of your startup:

  • Seed Capital. If you're just starting out and have no product or organized company yet, you would be seeking seed capital. Few VCs fund at this stage and the amount invested would probably be small. Investment capital may be used to create a sample product, fund market research, or cover administrative set-up costs.
  • Startup Capital. At this stage, your company would have a sample product available with at least one principal working full-time. Funding at this stage is also rare. It tends to cover recruitment of other key management, additional market research, and finalizing of the product or service for introduction to the marketplace.
  • Early Stage Capital. Two to three years into your venture, you've gotten your company off the ground, a management team is in place, and sales are increasing. At this stage, VC funding could help you increase sales to the break-even point, improve your productivity, or increase your company's efficiency.
  • Expansion Capital. Your company is well established, and now you are looking to a VC to help take your business to the next level of growth. Funding at this stage may help you enter new markets or increase your marketing efforts. You should seek out VCs that specialise in later-stage investing.
  • Late Stage Capital. At this stage, your company has achieved impressive sales and revenue and you have a second level of management in place. You may be looking for funds to increase capacity, ramp up marketing, or increase working capital.

Hope that helps! If you have any more questions on your different options or you need any legal advice when it comes to finding the best venture funding for your startup, don't hesitate to contact me or Linkilaw directly.

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Published on: Jul 22, 2016