Many new companies receive initial funding through private investments (such as seed capital or venture capital). In a private investment, young businesses work closely with investors so that the two are on the same page about the company’s growth and development.
Private investors - wealthy individuals looking for a profitable return in a viable business venture, also known as business angels or angel investors - will also offer networking opportunities and business connections or sometimes take on a management role in their invested company.
While other sources of business funding exist, like bank loans and government grants, private investors are willing to take risks on developing companies that many financial institutions are not (even more so in recent market conditions). Private investment funds are also often received quicker than funding from venture capitalists - an individual, firm or pool of individuals who invest large sums of money in already-established businesses - because less due diligence (investigations or audits of a potential investment) is involved. In turn, private investors are usually more patient about receiving a return on their investment than venture capitalists or large firms.