Not long ago, investing in startups used to be reserved for ultra-wealthy investment funds, which made ground-floor opportunities really difficult to access. The regulations that were put in place were meant to protect investors from the risk associated with new ventures.
However, as most investors have come to notice now, the benefits of investing in pre-IPO stages are definitely very attractive. Yes, startup investing can be riskier than ETFs, but it can also yield benefits that other assets struggle to provide. And while some investors prioritize risk, others prioritize returns, and the flexibilization in regulation has demonstrated that a great number of investors choose rewards.
Investing in startups is riskier than, say, a blue-chip stock. That’s only logical, because a startup is not yet established. But, as is often the case, the risk pairs with the potential for a major win. For example, did you know that Whatsapp’s only venture investor turned its $60M investment into $3B? Or that Chinese e-commerce platform JD.com turned a $10M investment into $2.4 billion? A smart investment at the right time may translate to a huge return.
Contribute to innovation
Many startups are pursuing goals that help make the world a better place in one way or another. These companies usually focus on innovation and on solving a prevalent problem that has yet to be addressed. Investors can be a part of this change and help it come to life, while they also contribute to the economy, as startup companies create jobs and contribute positively to the economy.
It is always wise to maintain a balanced portfolio and diversify your assets. Never put all your eggs in one basket! The more you spread out your investments across companies, industries and locations, the more likely you are to hit a homerun, and the more you’re protected from eventual market downfalls.
As regulations continue to evolve and these opportunities open more to retail investors, it’s worth taking the time to consider startup investing as an alternative option. Startups may warrant a small piece of the average investor’s portfolio.