The market is made up of large, medium and small companies. Anyone who wants to enter the free market for the first time needs, besides the idea for the business, an investment in startups. The right financing makes the start easier, and at least three important financing options are available to profit-oriented founders if they can convince investors with their business plan.

Venture capital funds for new founders

Investors with the necessary capital can invest indirectly in promising startups through private equity. A fund holding venture capital is meant to support new companies with a good business idea. High profits for the founder after the start-up phase are an expectation that the backers attach to providing the venture capital. Only if the founder achieves the highest possible profits does the investment pay off for the backers. Many backers provide investment in startups through the venture capital fund, and the best founder ideas win the funding. Backers take a financial stake in several new businesses; the backers' money is collected through the venture capital fund and distributed to profit-oriented founders.

Seed capital through business angel networks?

Investment in startups is possible through business angel networks; the German Federal Ministry for Economic Affairs and Energy is one of the points of contact. Founders with convincing business ideas get advice on what the path to the desired equity funding application looks like. Business angel financing is an option for a limited group of founders, because a niche with the prospect of high profits has to be found. Involving the business angel networks in the planning early in the founding phase saves time. In many cases, possible capital approvals are not granted immediately but only after some time of processing the application.

Investing in startups



Crowdinvesting as an alternative?
Online platforms search on behalf of founders for investors who want to put in smaller amounts. The first crowdinvesting financing project on one of the first crowdinvesting platforms was successfully completed in 2009. The extremely small volume of capital and the number of recipients have grown over the years. The crowdinvesting market has fundamentally become an alternative when other investment in startups has failed. Looking for alternatives to the savings account, many crowdinvesting investors want more return, because savings account interest is too low or isn't paid at all. High returns are possible for investors if the founder manages to establish themselves in a fiercely contested market. As the promised return rises, so does the risk of a possible complete loss of the investment. Experts on investments in startups say that off-exchange asset investment platforms should work transparently with investors and founders, because there is no deposit protection for investors.

  • New founders must forecast realistic returns
  • Investors must be informed about the opportunities and risks of the investment
  • This risky form of investment involves possible gains or heavy losses, up to a total loss
  • A current annual financial statement of the issuer is shown to the investor
  • Important information must be conveyed to the investor in an understandable way