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Startups – new businesses that are no more than fledglings, but have the potential to become industry leaders if nurtured. Seed money seems to be the most essential way to help these new businesses grow from an idea into a business.
But why should we invest in startups? Here are 6 reasons why it’s an excellent idea:
1. Return on Investment (ROI)
If you save one dollar in the bank today, it will still be one dollar at the end of the year. If you invest in securities, you might get 15% more. However, if you invest it in a startup, the chances are that your one dollar will earn you somewhere between 20 cents and 10 dollars. Therefore, the biggest reason to invest in startups is the higher ROI they promise.
Many naysayers would quickly interject here that not all startups are successful; many go down within the first year, taking your money down with them. I agree it’s true that most startups fail in their infancy. However, the ones that do survive promise higher returns, and therefore, investments in multiple startups are still a much better choice than investments in securities or mutual funds. The risks are high, but so is the investment.
That said, be careful about what type of startup you invest in, and keep the following points in mind when making investment decisions:
- The Idea – Determine the merit of the startup idea; is it worth it?
- The Startup Team – Evaluate the team at the helm of the startup. Are they knowledgeable about the industry, their idea, and business operations?
- The Purpose – what problem is the startup trying to solve? Is it connected to a bigger purpose?
2. Be a Part of the Solution
Whether we like it or not, money is the biggest motivator for most individuals. However, there are other motivators, too, and being part of the solution is a worthwhile one. Startups create good in the world in several ways, and you can become a part of it. Here is how startups help the community:
Create Solutions
Many startups are trying to create innovative products that will ultimately solve problems for humankind. Recyclebank is a startup that’s helping households remain committed to recycling their waste by earning some sweet rewards.
Ubiqare Health is a startup that making at-home palliative care possible by combining health and technology. There are hundreds of other examples worldwide; you can invest in one such startup to make it possible for them to make this world a better place.
· Create Jobs
In 2019, startups created 3.14 million jobs in the USA. They are responsible for creating millions of jobs worldwide as well. You can support your local and national economy by investing in startups that will later go on to hire people and create chances of employment to uplift the economy.
Professional carpet cleaning businesses are an excellent example of startups creating jobs in the local community. Entrepreneurs start low-investment cleaning services that go on to expand and become stable sources of employment. A representative from carpet cleaning Chislehurst explained that their business grew from a small cleaning office in London, and today they have hundreds of employees in towns across the UK.
- Promote the Industry of Your Choice
Finally, you can also promote the industry niche of your interest by investing in startups in that niche. For instance, maybe you are interested in video games so you could invest in virtual reality gaming to facilitate growth and improvement in this niche and so on.
3. Say Bye to the 9-5 Routine
Investing in startups is a source of income; if you make a calculated investment, you will likely receive high ROI from startups. What does that mean? Enough investments can mean that you are earning enough money to not work in a 9 – 5 job that leeches the fun out of your life.
Work-life balance is very important to most millennials; we don’t want to spend our lives stuck in cubicles and hunched over keyboards. A steady return from a startup investment means that you are free to do what you love instead of what you are forced to do to make ends meet.
Many people are enjoying smaller working hours and more relaxed lives because they have made sound startup investments. However, you can suffer loss also; some startups may go down. Therefore, keep the following in mind before making an investment:
- Thoroughly investigate the startup and determine its chances of success.
- Always invest in multiple startups to minimize risk and maximize returns.
4. The New Pension Account
Did you know that 66% of millennials are unable to save enough for their retirement plan? Inflated prices are one reason, but another is the rising popularity of the gig economy and the lack of corporate retirement plans.
As most millennials are self-employed, they don’t receive retirement benefits from a company like previous generations. Most are living from paycheck to paycheck and are not saving much for their retirement.
The returns from startup investments can become your lifetime saving; it is an excellent pension plan that can help you secure your future.
5. Diversification
Seasoned investors know to not put all their eggs in one basket; do you? If you want to minimize risk on your investment, it is best to invest chunks of capital in different projects rather than going all in one. Investing in startup companies reduces portfolio risk significantly; you can add them to your traditional bonds and stock investments and reap the rewards.
In recent years, co-investments have also become popular. Investment is now a team sport; investors are parenting up to reduce the risk of investment. Another great way to invest in sound startups and reap financial rewards while also gaining recognition and clout in the industry.
6. Early Bird Advantage
Startups are the cradle of innovation and potential breakthrough ideas. Uber, Airbnb, Snapchat, Apple, and Microsoft were all startups at one point, and now they are multimillion-dollar giants. If you are a venture capitalist, a big company looking for fresh ideas, or a small investor looking to invest in the next big thing, investing in promising startups is the way to go.
If your startup makes a breakthrough invention, it will have the first mover’s advantage, and the return on your investment will skyrocket. When the company is popular or goes public, it will become more expensive to invest in it, while you, the early bird, will have invested when the price was down.
Conclusion
We learned that startups are a smart investment choice because they offer high returns on investment, help you facilitate innovation and economic growth, minimize portfolio risk, save up for your future, and get more flexible working hours.
Does it sound appealing? Then hat are you waiting for? Let’s start investing!
