Who is an Investor?
Lee McMahon avatar
Written by Lee McMahon
Updated over a week ago

An Investor is a person who invests capital in a Startup in return for an equity stake in the Startup’s Holding Company. The equity stake may consist of shares, options to acquire shares in the future or convertible instruments that convert into shares in the future.

A Startup will likely go through several investment rounds as it develops. The Founders are typically the initial Investors in the Startup. Early-stage or “seed” investment may then be provided by outside Investors, such as friends and family, angel investors, crowdfunding platforms and accelerators. Later investment rounds, commonly referred to as Series A, B, C etc., will generate funding from additional Investors to help scale up he Startup towards becoming an established business. Investors at this stage may be venture capital firms, strategic investors, angel investors and private equity houses. These funding rounds are more complex to negotiate with Investors than seed investment, involving valuations of the Startup and preferential terms such as anti-dilution provisions, dividend rights, board appointments and voting powers.

Ultimately, with each investment round, more of the Startup is “sold” to Investors.

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