There are many reasons why investing in startup businesses is often a very smart move, but these can generally be categorized into two main areas – financial and emotional.
Financially, It Makes Cents
Startup businesses usually do as much as they can to attract investment. They need a lot of financial help to get off the ground and will often make attractive share offerings to potential investors in order to secure their much needed funding.
In addition, the perceived value of any company is at its lowest on startup, so astute investors can get in with a larger equity stake than they may otherwise have been able to afford.
The benefit is thus that, if the company does well, the return you get will be greater than would have been the case with a more established business. Returns of between five and a hundred times, and even a thousand times, the initial amount invested are possible, although it goes without saying that it is extremely important to make sure all due diligence on the founders, market, business and competitive landscape are carried out prior to investing.
Emotionally, It Feels Good
The “feel-good” aspect to investing in business startups should not be ignored. As an investor, you can pass on the benefit of your business acumen and experience to a new generation of entrepreneurs. You are also contributing to capital formation and job creation.
Even the best and brightest entrepreneurs don’t always succeed. Sometimes the difference between failure and success is timing and guidance. Your investment and your mentorship could make the difference to other entrepreneurs, help the business thrive, and possibly even change the world.
Many investors today started out as young, enthusiastic entrepreneurs with their own startup business. They know the benefit to both sides of a well-placed Dollar, and we can all learn from their example.
New companies and young businesses account for an overwhelming majority of gross job creation and are the key to revitalizing our economy. The more we help startups, the more startups can help America.
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