Private capital investors are the largest source of risk capital. Private or "angel" investors fund 20-30 times more businesses than the venture capitalists.
Private capital investors refers to private individuals who contribute their skills and money to start-up companies. They often work in groups to improve the efficiency of their due diligence and to allow them to complete larger deals. Private capital investment groups typically consist of 80-90 members and will expect around a 30-40% return on the investment they make in the business.
Their timeline for repayment is generally more lenient and relaxed than a venture capitalist. This is why many owners choose private capital investors to fund their businesses. The most important considerations to the investor’s decision are the personal characteristics of the entrepreneur and the market-product potential of the business.
Here are some interesting facts about private capital investors:
- Private capital investors groups funded 236% more companies in the year 2000 than were funded in 1996
- Of the companies screened and formally invited by private capital investor groups to present their business plans, one-third received funding
- Conservative estimates put the magnitude of private capital investors at approximately $20 billion per year
- On average, private capital investor groups tend to include 85 members who look for a 35% return on their investment
- Private capital investors fund thirty to forty times as many entrepreneurial companies as the entire venture capital industry
- Research shows that in the United States alone, one out of every twenty households has a net worth of at least $1 million