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Types of Investment Funds and What They Seek in Startups
Vlad Zghurskyi
23.04.2025
3 Min Read
When securing investor funding, it's crucial to understand the types of investors out there—and, more importantly, what they're looking for in a startup
Getting your startup off the ground often comes down to one thing: funding. Maybe you’re building an app, launching a product, or expanding your team; chances are, you’ll need outside capital to move forward. But not all money comes from the same place—or with the same expectations. From angel investors and venture capitalists to mutual funds and crowdfunding, there’s a wide range of funding options, each with its own priorities, strategies, and requirements.
In this guide, we’ll break down the most common types of investment funds and what they’re actually looking for in startups. Read on.
1. Angel Investors
Angel investors are usually wealthy individuals who invest their personal money into early-stage startups. They often come in before the business is making serious revenue and may even help guide founders with their experience.
What they look for:
- A passionate founder with a strong team
- A unique product or idea with growth potential
- Early traction or proof that the idea works
- A clear plan for how their money will be used
2. Series Funding (Seed, Series A, B, C…)
This is when startups raise money in different stages (or “series”) as they grow.
- Seed funding is usually the first big round, helping to get the idea off the ground.
- Series A and beyond help scale the business, improve the product, and expand into new markets.
What investors look for:
- At seed stage: a working prototype and a clear market need
- At Series A: growing user base and revenue
- At later stages: strong market position, solid financials, and a clear path to profitability
3. Venture Capitalists (VCs)
Venture capital firms manage large pools of money and invest in startups with high growth potential. They often get involved at the Series A stage and beyond.
What they look for:
- Scalable business model
- A big market opportunity
- A strong founding team
- Potential for a large return on investment (usually via acquisition or IPO)
4. Corporate Venture Arms
These are investment branches of large companies. For example, Google Ventures is part of Alphabet (Google’s parent company). These investors not only provide funding but may also help startups with strategic partnerships.
What they look for:
- Startups that align with the parent company’s goals or industry
- Tech or ideas that can complement their own services
- Potential for long-term collaboration or acquisition
5. Crowdfunding Investors
Through platforms like Kickstarter or SeedInvest, startups can raise money from the public. Backers may contribute just because they like the idea, or in some cases, they might get equity in the company.
What they look for:
- A product that’s easy to understand and exciting
- A compelling story or mission
- A strong marketing and launch plan
- Transparent communication and regular updates
6. Hedge Funds
Hedge funds are private investment funds available to accredited investors. They use advanced strategies like short-selling, leverage, and derivatives to maximize returns. They can be aggressive and risky.
What they look for:
- High-upside opportunities, often in late-stage or even public startups;
- Outperformance potential — they aim to beat the market, not play it safe.
Conclusion
No two investors or funds, for that matter, are the same. Some are risk-takers looking for the next billion-dollar startup, while others want slow and steady growth. By understanding what each type brings to the table and what they expect in return, you can focus your energy on the right kind of funding for your stage and goals.
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