How to invest in different types of startups?

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In July 2021, Zomato filed for an initial public offering (IPO), which was 38.2 times oversubscribed, with shares closing 65 percent above the offer price. Zomato was the first unicorn tech company to be listed on a domestic exchange. A whopping return of 1,050 times is estimated by the investor Info Edge. 

Startup success stories like that of Zomato may make you wonder how to invest in business startups like this or how to invest in Oyo rooms

So, if you are looking to invest in companies, Coffeemug.ai is here to assist you. Coffeemug.ai connects you with a wide network of mentors, investors, and other well-known executives in the field, in addition to providing all the coaching and market knowledge needed to move forward with your business venture.

Remember that turning a startup into the next big thing takes time, money, and risk. Before making an investment decision, first, you must know about the different types of startups in India. 

Six different types of startups in India 2021:

  1. Small business startups

Such businesses are highly focused on longevity rather than scalability. Small startups are typically self-funded and owned by individuals or a small group of people like friends or family-owned businesses. The primary aim of small businesses is to make a living and the owner is interested in growing them at their own pace, without the pressure of investors. Grocery stores, bakers, and travel agents are perfect examples of small businesses. 

  1. Large business startups

These startups are fueled by innovation and adapt themselves to the changing technologies catering to the ever-changing demands of customers and the market trends. Apple, for example, has never stopped developing and innovating since its first computer launched in 1976. Large business startups are usually backed by capital from already established companies. 

  1. Scalable startups

For people wondering how to invest in tech startups, scalable startups are the best options. Companies in a tech niche such as Google, Uber, Facebook, Flipkart, and Twitter were once scalable startups. This type of business involves extensive market research, comprehensive business analysis, large funding, and unique business ideas in order to identify market opportunities that may be capitalised.

  1. Lifestyle startups

Most of these startups are born out of a passion, usually a hobby, that becomes a profitable business. Richa Kar’s online lingerie boutique Zivame is one such brand that fully defines this category. Her wish to empower women to buy affordable and high-quality lingerie without hesitation led to the creation of this thriving lifestyle company.

  1. Buyable startups

A lot of people in the technology and software industry design startups from scratch (such as mobile apps) to sell them to a bigger company later and make a substantial profit. Large companies like Amazon buy such small startups to develop them over time and expand significantly. 

  1. Social startups

These businesses are focused on making a positive influence, supporting the community, and making the world a better place to live. The Kisan Network in India is an excellent example. This business specializes in assisting farmers all around the country in selling their products directly to businesses without the use of a middleman. As a result, farmers are no longer exploited and are able to harvest well-deserved income.

How to invest in business startups?

You can invest in a startup in two ways: 

  1. Direct Investment: A direct investment occurs when you give your money directly to a startup in exchange for equity in the company. 
  2. Indirect Investment: An indirect investment occurs when your money is sent to a fund, venture capital (VC) firm or other organization that will manage it on your behalf. VC firms raise money from investors and invest in startups themselves, or they may invest in startups through funds that they manage.

Points to consider before you invest in a startup:

  • In most cases, when you are investing in a startup, it is the faith you are putting on the novel idea that the founders believe has the potential to scale big. As a result, thoroughly understanding the concept and business before investing your money is critical.
  • What you have at the budding stage of a startup is just a prototype that is still in the validation stage, hence you are heavily investing on its founders who are putting the idea into action.
  • In order to give you a solid return on your investment, a company must cater to a huge market to have a high chance of becoming significant in the future. 
  • The goal of a startup is to increase substantially and become the market’s dominant player. As a result, it’s critical to understand which other competitors are in the market today so that the firm you are considering investing in, has excellent plans in place to cope with them.

Conclusion

The Indian startups’ ecosystem is currently at an exciting phase, with unprecedented deals and activities taking place, especially in the technology sector.  This is a fantastic chance for a large number of retail investors to participate in the Indian startup era and profit from it. Join Coffeemug.ai today to connect with industry experts who can help you learn more about how to invest in technology startups?

FAQ’s

Q. Is it good to invest in startups?

A. Any individual, whether Indian, NRI or foreign, is permitted to invest in a VC/debt/private equity fund as long as they have a minimum cash to purchase these investments.

Q. Is it good to invest in startups?

A. Investing in startup firms is a high-risk business, but it may pay out handsomely if and when the investments succeed. Because the vast majority of new businesses or products fail, the danger of losing one’s whole investment is quite significant. 

Q. Can I buy OYO shares?

A. Yes, purchasing and selling unlisted stake in India is completely legal.

Q. Do startups pay dividends? 

A. Dividends are payments paid by a firm to its stockholders from its earnings. Most of the start-ups or early-stage businesses rarely pay dividends to their investors.

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