Venture capital and 'angel' investment seems like an attractive alternative to a personal loan — you're asking people to invest money into your business in exchange for a share of the profits. While it can cost you more in the long run, it means you won't be borrowing money as a loan that needs to be paid back whether your business makes a profit or not.

Venture Capital

Venture capital is the 'big' option — you should only really be looking at it if your work from home business concept is technology-focused and can make a bigger profit if you had access to better hardware.

Venture capitalists look mainly for businesses that have the potential to grow rapidly, but will also want everyone involved to be experienced and confident.

Approaching a venture capitalist not much different than approaching a bank for a loan, except you'll have to be a much more convincing. The person you meet will be a specialist in whatever industry you're planning to enter, and they'll run very quickly if you don't come across as totally sure of what you're doing.

Make sure you research the venture capital company before you meet them, to make sure you know what they look for and who their existing clients are.

Remember, you're being scammed if they ever ask you to pay anything upfront, and be wary of anyone who insists they won't sign an NDA (privacy agreement) before they see your idea — they might be planning to hand it to one of the companies they've already invested in.

You should be prepared for competition for venture capital funding to be fierce. Really, the best way to acquire venture capital is to build a good version of your business on a small scale and then wait for them to come to you. Also, you should be aware that accepting venture capital funding will give the venture capitalists a significant say in how your company is run.

They'll try to force you to grow the company as large as possible, before somehow cashing out, whether it's a sale or selling shares. They will, effectively, take over your company and possibly help you get rich — not too much fun if you're out to start your own business and get away from the typical corporate way of working.

Angel Investors

Angel investors are like venture capitalists, but on a much smaller scale. They are 'real people' — people who will invest in smaller companies. For home businesses, angel investors are a much better idea than venture capitalists.

Angels tend to behave more like a business partner. They'll invest, say, half the start-up funds, and then take a personal role in the day-to-day running of the business. This contrasts with venture capital companies who have a tendency to be faceless and issue you written demands to become more profitable. A business angel brings experience and knowledge as well as money, and they can be a great asset to your business.

Still, you should remember they're in this to make a big profit — when you build your business with the help of an angel investor, you'll have to show them how they're going to get twice as much out of the business than they invested, and how quickly.

This doesn't necessarily mean your business needs to grow rapidly, but it does mean that whatever you plan to spend their money on has to be some kind of tool for making back far more than the original investment over a relatively short timeframe.

Staying Independent

Of course, the best way to stay completely independent is to avoid accepting any outside investment. If you really need funding, there are still ways to accept it while staying as independent as possible.

Make sure you keep at least 51% of your business. Regardless of many investors you have, you maintain 51%, otherwise it's not your business any more.

Don't feel as if you're entering some kind of big system where you're lucky to be and you have to only play by their rules — if you have a genuinely good business plan, then they're the ones who should be begging you for the opportunity to invest for such a good potential return.

If all else fails, you might be able to persuade your friends and family to invest just as much on far better terms.

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