A startup is a new company that has the potential to seek, develop and validate a successful business. Major market players are always on the look-out for startups to invest in due to the number of successful startups over the last few years. A startup seems to be a sure shot way to get returns on your investments. There are definitely advantages of investing in startups despite the fact that some startups fail and take down investors in the process.
There are a number of reasons why investing in startups India is a good idea and some of the most relevant ones are listed below.
Diversify: Continuous diversification of your portfolio expands its overall performance and introducing private equity and venture capital at the right time is a powerful method to do so. The overall performance of startup companies is less likely to be affected by macro-level market shifts, partly due to their ability to pivot and so there is usually very little correlation between private companies in their early stage and the overall market. Therefore, maintaining a small portion of your portfolio in startups can help reduce risk while increasing your investment returns.
Innovate: Once an individual becomes a successful entrepreneur, they cannot go back to being anything or getting into another field. Any aspiring or former entrepreneur will attest to the fact that there will always be a need to problem solve, strategize and innovate. In such a case collaborating with other entrepreneurs to provide unique suggestions, insights, and opinions can make owning a startup all the more exciting.
Risk and Reward: Investing in a startup can prove to be risky business. You must also be prepared to accept the fact that no startup can give you immediate returns. However, if you have invested in a startup that has good financial projections and has done its market research then you can expect returns and profit after a period of time. Remember to examine the startup and ensure that they have a solid business plan, more or less accurate financial projections, a dedicated and innovative team with the best talent, and a unique product before giving them your money.
A Promising Future: Investing in startups is a futuristic move; investment is all about securing the future and getting returns from your investment which helps support innovations in an ever evolving world that have the potential to be revolutionary. Investing in startup companies allows you to be part of something bigger and enables you to become more involved in a company’s progress and growth. Every startup comes with its own set of strengths and risks but you can minimize risk by investing in a startup that is promising and has good financial projections.
Expansion of Venture Capitalists: Investing in innovative ideas can definitely be profitable to investors. When an investor backs a startup, they should ensure that they are backing the right one. It also shows a desire to boost the economy and to hopefully make more companies seek investment from investors in the future. As an investor you should be aware of the fact that startup companies are dependent on your investment and it is your single investment that enables them to reach a step further in the market. The startup will be successful if the investor and the business owner have a healthy relationship with the single purpose of growing the business and earning profits from the investment.
Four tips to keep in mind when investing in startups are:
- Mentally write off your investment – Reports say that seven out of every ten startups fail. Others say this figure is nine out of ten startups fail. The market is still in its infancy and it is difficult to come up with more accurate data but whatever the case may be, it is advisable to only invest money that you can afford to lose. Do not make an investment with money that you need for other purposes. There is no guarantee that the startup you invest in will give you returns. It may buckle under and run itself into the ground.
- Be ready for a long term relationship – If you are looking to make quick money then a startup investment is not for you. Most startups do not make money in the first few years and are cash flow negative.
- Set up a good information flow – If you are in the habit of checking the daily share price of stock and are used to investing in shares of listed companies, then startup investing is not ideal for you. Trust cannot be built in an instant. Startups should send updates on a regular basis from the beginning and should ask for advice, introductions and support. If you are an intelligent investor, you will stand by ready to provide the necessary support.
- Ask for advice and follow Angel Training – Startup investing is a skill that you can acquire. As an investor you should always be on the look-out to educate yourself and learn more. Angel investment training can be found online with angel investment platforms and at startup accelerators. If you get to know more angel investors, you can share potential investment opportunities, learn from each other and invest as a syndicate.
It is important to get the right help especially if you are a first time investor and are new to the business of investing in startups. CoffeeMug.ai is the best platform for startups to move forward with their innovative ideas. The platform encourages potential startups in growing and transforming their ideas into viable business plans. The team at CoffeeMug.ai will help an entrepreneur determine whether his innovation is marketable, do market research to determine the best combination, receive feedback, and produce a market-ready prototype all the while assisting first time investors with evaluating the business plan, ensuring the financial projections are in order and ensuring that the company is a viable investment.
FAQs
Q. What are 3 benefits of investing?
A. Tax exemption, high return on investment and saving money for retirement are the three main benefits of investing.
Q. What is investment and its importance?
Investing allows you to build money while also generating high returns. Furthermore, investments have the ability to help you achieve your financial objectives, such as acquiring a home, developing a retirement fund, and establishing an emergency fund, to name a few.
Q. Why is investing better than saving?
A. The level of risk taken is the most significant distinction between saving and investing. You will normally receive a lower return by saving, but you will be virtually risk-free. Investing, on the other hand, allows you to earn a bigger return while also exposing you to the risk of losing money.
Q. What is your investment strategy?
A. Investment strategies assist investors in determining where and how to invest based on their projected return, risk capacity, portfolio, long-term vs. short-term holdings, retirement age, industry preference, and other factors.
