Capital providers are people or organisations which aim to provide capital funding to others who need them more. The improvement in the overall wealth of today’s increasingly educated society has resulted in a growing demand towards investment opportunities. As a result, capital seekers now have a variety of capital providers that they can tap on, with varying purposes and motivations behind their investment.
Traditionally, capital providers often comes from accredited investors which include individuals or corporations with high amount of investable assets. For example, institutional investors such as banks and large companies are developing venture capital arms to provide capital to start-ups with high growth potential. Entrepreneurs and businesses may also head to the bank to obtain bank loans during times of financial turbulence. In addition, private equity firms, venture capital funds as well as hedge funds have also all been becoming increasingly receptive towards providing capital to emerging entrepreneurs and businesses.
Looking at the sources of capital from the individuals’ perspective, ultra-high net worth individuals as well as high net worth individuals may often act as angel investors to provide additional funding to others when needed. Others may seek out their friends and family members to meet their financial needs. However, with the rise of crowdfunding, it has also become increasingly easy for people to seek funding from members of the public as well.
Institutional investor such as private equity firms and venture capital funds often find themselves investing in non-public companies with high growth potential. These companies may come from fast-growing, emerging industries such as information technology, healthcare or even creative industries that involves sectors like game design and animation agencies. On the other hand, hedge funds and commercial banks are platforms that can provide funding to companies in established industries such as the airline and real estate industries, through the acquisition of stocks or provision of loans.
While the major bulk of capital providers tend to be congregated at the financial industry, many large corporations from varying industries have also been actively seeking for investment opportunities. For instance, telecommunications companies may have venture capital arms that look for entrepreneurs who are developing potentially disruptive networks or wireless technology.
On the other hand, individual capital providers can come from all walks of life as long as they have additional funds that they are willing to invest in. This is because individuals today do not always have to commit themselves into making large investments. As mentioned previously, the rise of crowdfunding has allowed investors to make small contributions to businesses and projects of others.
For many institutional and individual investors, the aim of providing capital to others comes with the expectation of generating returns from their investments. Investors often want to boost their wealth and profit in return for the risk they take in investing in others. However, companies may also choose to invest in up and coming entrepreneurs so as to identify disruptive innovation. By doing so, this will provide them with the ability to remain relevant and mitigate the chances of being displaced in this increasingly volatile world. Regardless of the motivation, capital providers must be able to identify the correct investments that would produce their desired returns. This is especially true in today’s world whereby the number of capital investment opportunities are on the rise. Failure to invest wisely will result in precious capital not being effective.