Let's face it. You and your children after you would have been set for life if you had invested in Amazon in the ’90s. The Internet Age gave rise to many such startups, and investors did not know what to do with their money and ended up investing in many startups hoping that at least one of them would blow up as Amazon did. If you factor in the risk-reward ratio, there are high risks while investing in startups, but the reward can be higher.
Some experts might even debate that investing in startups may be better than investing in stocks. For one, you have the opportunity to influence the company in its outcomes. You can help them, change the direction of the company and guide them to making better decisions. Investing in startups allows the investors to add value to the start-up as well.
Today, there are many opportunities to invest in startups because few companies go public now. Our best investments are when we are identifying the change in culture, technology, and consumerism. As investors, we have the ability and the opportunity to identify and choose what change is going to have an everlasting impact on the future. Investors have the freedom to find and chase the opportunity to monetize the change. While the wealth gain involved in investing in startups is unparalleled it comes with its risks and consequences.
When you invest in a company, you become a partner. You invest in the asset. You get a part of the ownership of the company. Although it requires commitment. Your stake in a Startup, as opposed to a public company, is not very easy to sell. Although you can be sure that once it goes public and gets funded publicly, you can expect a huge return on your investment.
Access and ability to invest in a private company before it goes public is limited. The competition in the Startup market for investing is way less when compared to other investment opportunities. The ability to invest also makes it a better option as not many people can shell out a large amount of money. The price for the startups can be negotiated as well whereas for other investments like stocks and crypto is determined by an open market. With the inefficiencies in the pricing of start-ups, there is more opportunity for people with the assets and resources to quickly invest. In other public assets, banks and people are determining the price. You can also get real-time reactions to market information.
Sense Of Personal Connection
What is better than investing in something that you can have a personal connection with. You can develop relationships by investing in startups. Sharing the wins and losses, dreams and nightmares, seeing the World through the Founders eye is unique which only a startup investor can experience. There is nothing better than making money and seeing everyone around you make money as well.
The law of power.
The law of power states that a small percentage of the startups you invest in will give you the majority of your profits. For instance, let us take an example of one of the top Venture Capitalist firms, Andersen Horowitz. Their portfolio shows that sixty percent of their returns come from about six percent of their deals. This shows that to make a profit from startup investments, the six percent of deals should be easily accessible. Your remaining investments probably will or will not provide sufficient returns for you, but that six perfect of your investment is where you can expect a return from. Investing in several startups is like buying lottery tickets, it’s the portfolio approach that aids the early-stage investor to create mega returns.
While investing in startups, it is not about the number of hits you have, it's about the magnitude of hits they create. The opportunity of wealth creation startups provide are limitless, but it's also highly conditional and risk-oriented. It is always a good time to invest in startups, even if the market is at its all-time lows. If one has an appetite to handle a high-risk investment, go for it. An investor who can act as a mentor and guide the businesses well will win this game. It gives you a sense of control, and the impact the startup will create in the future also depends on you. Remember to create a varied portfolio to ensure you have that six percent that will grant you mega returns. Since it is an illiquid asset class, investing about 5 to 10% of your portfolio would seem wise. The best companies may give the best returns only after ten years. An investor must be able to stay patient with their investment.
Find the right ecosystem.
All research and investment go to waste if you don’t have access to investing in the top startups. It is important to be in the right startup ecosystem at the right time. It takes effort and connections to get through a competitive ecosystem as most top investors would be looking for the best. Finding the right ecosystem and becoming a part of various investor networks to collaborate with other investors and firms is necessary to get a slice of the most wanted cake. This is where ChangeMaker Ventures comes in. As Startup investors, you not only make a lot of money, but you get an opportunity to make an everlasting impact on the world. As discussed before, you also get to meet people. Together, you can create opportunities to make a difference together. Changemaker Ventures is the first network for mission-driven humans who yearn to connect with like-minded people while benefiting from early investment access to some of the most innovative tech companies in the world. Join today to reshape the future!