Private investors for small businesses include private equities, venture capitalists and angel investors, explains the U.S. Small Business Administration. Each of these types of private investments are managed differently and provided with different expectations. Small business start-ups should be aware of these differences when accepting each type of investment.
Private equity refers to a number of different investment types that are commonly made by private individuals or privately-held companies, explains the U.S. Small Business Administration. The purpose of such an investment varies widely both in range and scope, and depends largely upon the specific situation. Venture capital also functions as a private equity, but venture capitalists generally seek out start-up businesses that have a high potential for rapid growth, such as companies in the technology industry. Venture capitalists provide industry expertise and development consultation along with investment funds.
Angel investors also seek high returns from their investments in start-up businesses, and they often tend to be former entrepreneurs with valuable experience and expertise to offer new businesses, reports the U.S. Small Business Administration. Their investment framework does not differ greatly in strategy, practice and objectives from that of venture capitalists, although it does differ in scale. Angel investors typically invest only a fraction of the amount invested by venture capitalists.