When you think about investment opportunities, often you’re mostly thinking about large, well-established corporations with steady revenue streams. But you forget or fail to realise that at some point, even these corporations started as small startups just trying to figure out how to grow. So does it mean if you put your money in the next company that springs out of someone’s mom’s garage will make it the next Apple?
Unfortunately, it’s not as easy as that. Investing in startups comes with high risks and high rewards as well. For instance, when Google started in 1997, its first seed money was a $1 million loan from family and friends, and we all know how that turned out. However, for every success story, there are a hundred failures.
And before you turn into an angel investor or invest in a startup on one of the crowdfunding platforms, here are a few things to ponder.
How You Can Invest in Startups
The good thing about the success of some startups like Google is that they have made investing in other upcoming companies easier. Unlike Google and Apple founders, who had to work with barely any structure when raising their seed money other than what they knew and their connections. Today, the internet has made accessing funds and investment opportunities much easier. Here are a few ways you can invest in startups:
- Crowdfunding: these are platforms dedicated to new startups looking for seed money to get their innovations out in the market. Platforms like Gofundme have made it easy for aspiring investors to explore different startup ideas and invest in them in a safe and well-structured manner.
- IPOs- these are the first public offerings of private companies joining the public realm. They might not necessarily be startups, but some, and most often, are young companies still looking for ways to grow. They can present lucrative opportunities as most companies have learned how to walk and are more likely to succeed than those with unproven concepts.
- Bonds: a less common way of investing in startups is offering them money to start their project with an understanding to get it back plus interest at a future date. However, once your loan is paid, you’d need to purchase more bonds to keep benefiting from the company.
Advantages of Investing in a Startup
Unlimited Potential
Every single thing starts with an idea. The only difference between the biggest companies you know and great inventions you’ve never heard of is that they didn’t get a chance to bloom. This is obviously a crude simplification, but you get our point. No matter how small your investment is, investing in a startup can lead to the creation of the next billion-dollar corporation. But you will never be part of such creations if you never take that first plunge.
The Opportunity to Pass it Down
It’s no secret that success looks different for everyone, and what motivates and drives you may not necessarily be what does for the next person. So no matter what inspires you to want to invest in new companies, the satisfaction of seeing them succeed and meeting your investment goals is enough. However, nothing will ever replace the positive energy you create after helping someone else get their own version of success.
The Opportunity to Build Something Great
Most startup ideas that come your way will probably be trash and a waste of time and money. However, there will be one or two with great potential to change your life and everyone around you. Joining such startups early will give you a first-row seat to the ride and make you part of the history that creates whatever it is. We’ve also added a link to the best UK automated trading platforms to help you manage your investments.
Risks of Investing in Startups
Failure
The risk of investing your money in something that will not materialise can not be understated when investing in startups. You can excitedly put your money in a company today only to wake up to nothing the next.
Dilution
Investing in a startup early is good as it can earn you a good ownership stake. However, if in the future the company needs to raise more funding. Your share can get diluted and reduced to a minor player.