Investment is an activity that can easily change the way your bank balance looks. You can reach from an average income to affluence with the correct investment.
However, what is the correct investment?
How is it decided and differentiated from the rest?
This is decided by two factors,
Your financial goals;
And, your risk-bearing ability
Understanding these will make you formulate the best investment plan for the best returns on investment.
Out of all the investment options in the market, one can bring a lot more rewards than others. This is investing in a start-up.
What does Investing in a Start-Up mean?
A start-up is an entrepreneurship that has just embarked on its commercial operations for profit.
These establishments are at their budding stage and need to be nourished with water to attain their growth. The water for them is provided by investment money, which is provided by the investor.
When you invest in a start-up, you must keep in mind two things.
- The entrepreneur’s passion and his vision for his business, the more intense these are, the higher will be the chance of the start-up achieving success.
- The business idea, it should be realistic and achievable at the same time, along with this the business idea should fulfill a need.
These two features of the start-up will let you know whether the business has the potential of being profitable or not.
Benefits of Investment in Start-ups
Identifying the potential of budding entrepreneurship can change the game of investment for you. The question of how to invest money will only have one answer for you then, which is in a start-up if you choose this path. The examples and success stories of investors are too many to even count. This gives you an inclination of the benefits of this particular investment.
All the advantages of this endeavor can be summed up in three points;
When you trust your gut and take the leap of putting your most priced asset, money, in a start-up, you never do it just for the sake of it. The return on investment is a reward that is mandatory, but apart from this you also take some percentage of ownership in the business. It can be 10% or 50%; both the investor and the investee would decide this.
Therefore, by investing your money as capital in an up-and-coming business, you actually become a part-owner in it. Isn’t that the most lucrative and enticing aspect of such an investment? Ownership would mean you will get a share in the profits of that business. If it grows, your profits will grow with it.
Since you are the owner, you can actually foresee the operations of the business, and if you feel something should change, you can voice it and your opinion would be heard and implemented. Therefore, you can steer the start-up from losses to profits with your expertise.
The big names in the business domain like Facebook and Microsoft, all invest in start-ups and earn an income that becomes a significant proportion of their profits. Very few start-ups have failed under their leadership.
High Risk and High Reward
A start-up is indeed a risky affair, you can never be sure that it would work. Along with risk, you also need to monitor it and its activities to ensure the safety of your investment. In simple words, an investment in a start-up is almost similar to a chronic headache. Its newness makes it more vulnerable to mistakes and heightened risk. You must invest only if you think that you can bear parting with your money if the worst happens.
However, an investment in a start-up can also bring you the maximum ROI.
I’ll explain this with an illustration.
Peter Thiel is a German-American entrepreneur and venture capitalist. He is also the first-ever investor of Facebook. He made that investment in 2004 when Facebook had not even become popular in the US. His keen eye to judge the potential of an endeavor made him earn millions on the same.
Today, Facebook is considered to part of the Big Five, a group of five most successful companies in technology – Facebook, Microsoft, Apple, Amazon, and Google.
Facebook earned its revenue at a staggering 70.8 billion USD in the year 2019.
If that does not persuade you to start investing in nascent businesses, I am not sure what will.
Help the Economy
Every country has been working diligently to promote its business sector. This sector will only grow, if all types of businesses contribute to the economy, not just the big ones.
Therefore, governments, not just in Ireland, but all over the world are encouraging people to take on start-ups. Subsidies, tax reliefs, and even low-interest start-up loans are offered by the state for the growth of these business endeavors. The governments for their investment appreciate the investors and this appreciation is shown in the form of tax relaxation.
Therefore, you earn money and give back to society at the same time, a win-win situation for everybody.
In the end, all I want to say is that investment start-ups can truly change the future for you and your family with its returns. It can also change the fate of the nascent entrepreneur and his establishment.