The primary early stage investment sources

There are a few primary groups that you can tap into for an early stage investment. They all have their own uses and not every group of investor will make sense for your particular early stage investment needs. You'll have to weigh the pros and cons before deciding which group or groups of investors that you want to approach.

Friends, family, and fools

As the old saying goes, the easiest place to look for startup capital is from friends, family, and fools. These people are the most likely to support your idea on blind trust and will probably give you the best terms for the money that they lend you. They are also more likely to sit back and let you make all of the business decisions. There are several drawbacks to this group though. If your venture goes south, these people will lose their money and your relationship with them may be strained. For this reason, it's not always a good idea to work with family or close friends. Also, since your friends, family, and especially "fools" are not professional investors, you may get a false since that your business is a good idea just because they invested in it. Professional investors fund startup companies as a full-time job and know exactly what to look for in a successful business and more importantly, what commonly causes a business to fail.

Angels

Business angels are high-networth individuals who invest their own money into a small business to help in grow. Angels typically invest less money than a venture capital firm, but can still put forth enough capital to sustain the growth for the majority of startup ventures. Angels are rich for a reason, and it's because they know how to handle money and make investments. These individuals will likely want to take a more hands on approach to guiding the strategy and decisions that you make with your business.

Venture Capital

Venture capital firms are able to invest more money than a business angel. Since there's more money on the line, they'll also tend to perform much more due diligence on potential investments and typically demand more control over the management decisions made by the companies that they have decided to fund.

Banks

These institutions may be able to provide you with a small business loan and take a hands off approach to management. However, they will want the money repaid within a certain time frame and aren't usually interested in taking on an equity stake in your business. Banks tend to be very conservative and may not be the best place to look if you're hoping to raise a fairly large investment or if you're you want any business help from your investment partner.