Do You Know What the Difference is Between Venture Capital, Private Equity, and Debt Capital?

Have you ever heard the terms “venture capital” or “private equity?” Well, if you are starting a business, you will need to know what kinds of investors you need to contact and the difference between venture capital, private equity, debt capital, and how investors are categorized. You will also need to know about what conditions different forms of capital is distributed to aspiring entrepreneurs.

Debt Capital

What is debt capital? Well, you can think of debt financing as a loan from a bank that you have to pay back with interest. In reality, that’s exactly what debt capital is. Many entrepreneurs often resort to getting some debt financing to start their business. Debt capital, depending on its size, can be obtained from your regular bank or if it is a large sum of money, you might have to go to a special bank known as an investment bank. As far as the investor who is giving you the debt capital is concerned, debt financing is a much lower risk investment compared to equity capital. This is because debt capital is funding that is lent to you, just like as if you are taking a loan out for a car or a mortgage on your home.

What is the interest rate on debt capital? In most cases, when in investor who invests debt capital to a budding company, he expects to make at least ten percent off of the sum that was invested into a given company. Furthermore, debt financing is usually given to those entrepreneurs, who the investor believes is most likely believes will pay the debt off in due time.

Equity Capital

Equity capital, on the other hand, is different because unlike debt capital; you do not need to pay anything back to the investor. Equity capital is funding that practically every company gains as its business grows. Equity is usually invested out of a particular fund and is classified as either private equity and venture capital.

Private Equity and Venture Capital

Basically, private equity is an equity fund that belongs to either privately owned institutions or private individuals. Usually private equity is invested by institutional investors, who are people that specialize in investing private equity from such institutions. Institutional investors usually work for a private equity or PE firm that manages private equity. Venture capital is also private equity but is managed slightly differently than private equity. Venture capital is actually private equity that is usually reserved for investments to companies that have the potential for high growth.

For those of you who need financing and do not want to have to worry about debts, you would like to have some kind of equity capital, be it private equity or venture capital. This funding is much better than debt capital, because unlike debt capital, you do not have to pay the investors back. Instead, with equity funding, an investor makes money when a company cashes out. This usually means that when a company is bought by another company or is prepared for public offering, that is when equity firms make their money. The other side of the coin, however, equity capital is a much more risky investment for the investor than debt financing, because with equity capital, an investor makes money only with a buyout, initiate public offering or IPO, or an exit strategy.

Investors

As mentioned before, there are different investors and investing institutions. Some investors are wealthy individuals who invest their own money to entrepreneurs whom they like, whereas others work for institutions, such as private equity or venture capital firms and invest money from their institutional funds.

Angel Investors

Angel investors are wealthy private individuals who invest their money into a given entrepreneur for whatever reason. Some angel investors invest in a particular company because they might like that particular entrepreneur or feels charitable and wants to share their own entrepreneurial experience with other budding entrepreneurs to get on their feet. Other angels might invest in a company because a particular company might fit into that angel investor’s values, ethics, or other personal interests. If you have a wealthy relative and he invests in your company simply because he wants to help out a member in his family, he is also an angel investor.

Venture Capitalists and Institutional Investors

Unlike angel investors, venture capitalists and institutional investors do not invest their own money. Institutional investors usually work for a private equity firm and invest equity from funds that are usually parts of a pension fund or other types of funds. Venture capitalists are investors who solely invest in venture capital and work for venture capital firms.

Where Does the Money Come From?

Well, that is a good question. In the case with most successful private equity and venture capital firms, the money for investments comes from venture funds that these firms have raised. When a venture capital or private equity firm is successful with their investments, they are able to raise new funds for future investments. Again, as mentioned before, equity investors cash in on their investments when a company is liquidated by either being bought out from another company, etc.

How Do You Contact Investors?

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Top 3 Things You Should Do Before Choosing Your Private Label Olive Oil Supplier

There are many reasons why people are ecstatic about creating their own product line of olive oil.

One reason is its growing market. As people become more aware of the benefits brought by it, the demand is steadily increasing. The fact that you can find olive oil as an ingredient in almost any healthy product, any entrepreneur would really be tempted to join the industry.

Another reason is passion. Health gurus and beauty bloggers are just a few of the people who love olive oil, and incorporating their passion into their business is never a bad idea, right?

So before you start choosing and calling your private label olive oil supplier, here are the top three most important things you should do first:

Study the Market

Regardless if you already own a business or are just starting up, you should study first your target marketplace.

Who would possibly buy it? Can your market afford to purchase extra virgin olive oil? The best customers are those who won’t mind paying a high price as long as the product is worth it. But this is not the only factor you should consider.

Price Competition

Knowing the current prices on the market will serve as your guideline in choosing the right supplier in terms of the pricing of bulk orders.

You can also determine how much profit you can gain, and how competitive you can be in the market. More importantly, since you are creating a privately labeled line, make sure that your price can compete with the branded ones.

Qualify the Suppliers

Truth is, the olive oil industry is quite a small niche, so you will want your product to stand out.

Basically, you can really stand out if you choose the right packaging. Packaging includes the style of the bottle, how much of it you want in a single bottle, and also, the creativeness of the whole packaging concept.

But the question is, can the manufacturer achieve this kind of packaging?

There are a lot of suppliers, but if you think that you can just pick the right one up easily, think again. The right supplier should, above all, catch up on your vision for your products.

For example, the best private label olive oil supplier are those who have sample packages ready but also welcomes their clients’ ideas and desired characteristics. There are even companies that will send a virtual sample for their clients to see how their order will look like. This kind of flexibility gives ultimate freedom for the clients to own their product.

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