The popular word “start-up” means a business project that is relatively new or in the development stage. For the sake of further development, they look for investors. And they invest in start-up businesses so that they can receive a large percentage of the profits for their participation in the financing for the foreseeable future.
What are investments in startups?
The backside of the moon is that the most promising projects are sought for investing in startups. No one will invest in a startup that is not interesting from a profit perspective. Finding the right one is very difficult – many people promise profitability, but even in IT, only one out of 100 startups becomes successful thanks to investments.
The possibility of getting a return increases if you plan carefully, carefully select the objects, and conduct a qualitative analysis of all parameters. In addition, a smart sponsor will not only invest in one startup but distribute funds among several ones, because diversification is also necessary here. Classical investments assume the generation of profits from several sources. Therefore, traditional investments are usually made evenly in several currencies and types of precious metals.
How people who are experienced in investing act:
- They choose areas in which they are initially quite good. Due to this, they reduce time and money for studying the characteristics of a given niche.
- They select partners who thoroughly know and can be trusted in the chosen field. They start searching for startups by subscribing to specialized resources/publications and participating in industry events, often international ones.
- They understand that cutting-edge ideas are difficult to squeeze into a framework of logical calculations, so they rely not only on intuition but also on the potential of the startup team.
- They arrange negotiations with the founders, assess their impressions of the meeting.
- They ask for a business plan to make sure the marketing is adequate and the startup leaders have a vision of the future.
- They try the product or service themselves to see the prospects for themselves.
How profitable is it to invest in startups?
According to the CrunchBase research, on average, startups raise from $25.3 million in investment money and later sell for $196.8 million. A return to investors is about 676%. If you take out the owners who themselves invested in their businesses, then even half or a quarter of that would make 350 or 175% profit. And even such a value, which is close to real life, looks very attractive.
In the same study, it is recorded that already after 18 months of the startup investors can successfully exit the project. It is also profitable to exit after 7 years, but too long a waiting period is not inspiring.
For beginners, it is ideal to team up in investment funds or pools of several investors. It’s easier to break even that way and minimize losses.
To increase the share of future profits, you can engage in training startups on their own terms. Especially since people who head young companies have little knowledge and skills for business development, and your advice as an experienced businessman will be valuable to them.
Look for projects at domestic and foreign exhibitions, competitions, and conferences dedicated to startups. And information on events in industry-specific media outlets and on relevant sites. A startup has a chance to become a super-profitable company thanks to investments from investors. This environment has a minimum of formalities, decision-making takes little time, and in a team of enthusiasts, any ideas are implemented quickly and creatively.
On the one hand, investing in a startup seems like a lottery. But on the other hand, investing is also a profession that can be learned. For historical reasons, it is worth learning from Western investors, because their private property has never been taken away by law.
Victoria Suarez is a business consultant from Sacramento. She gives advice on how to run a business, which methodology practices to use and how to make the right investment. Victoria helped many businesses such as https://www.pacificpreciousmetals.com/ to grow and she is proud of this.
Victoria is a business analyst and representative of Pacific Precious Metals (https://www.pacificpreciousmetals.com/silver-bars), has gone through the recent five years consulting worldwide heads, directors, and a great variety of businesses, conveying powerful, enduring, communications-led development.
Her work includes:
Global changes in real-world language
Rescuing businesses and preparing team leaders’ plan for these changes
Overseeing change through execution and support follow-up.
Startup stock image by PopTika/Shutterstock