Investing in a company at the beginning of its life cycle can prove to be very profitable. However, it seems that investing in startups is reserved for wealthy capitalists, and not for middle class citizens. But this is not true.
What Startup exactly is?
A startup is a small company set up by one or more entrepreneurs to develop a unique product or service and bring it to market. By its very nature, a common startup accelerates with the first money from the founders or from their friends and family. They are not part of a larger company. Startups are often associated with the tech field, but this is not always the case. Startups are usually set up by a small group of people, usually friends or businessmen, who have an idea which they want to make a reality. Many firms are now regarded as major companies starting out as startups, including Uber, Facebook and Apple.
Why You Should Invest in Startups?
Investment in a startup is for people who want to take a chance on a company they really believe in. It is because of investors who believe in the people behind the company and in the company. They want to help the company reach the goal and get some benefits or return from the process. If you want your investment to be more than just making money work for you, an investment in a startup would be a good decision.
One of the best ways for individuals to invest in startups is through investment platforms that are focused on startups.
Investing at first may seem like an opportunity for those who are willing and able to invest a few million dollars in a new technology company. While that type of investment exists and is very important, not all startup investors who are strategic in the financial sector are very rich. Some are middle-class people who want to get on the floor of the business they believe in.
Imagine if you were one of the first investors on Facebook, Apple or Uber. If this seems crazy, keep in mind that every company needs an initial investment, and individual investors can now take part in financing more easily than ever before. Investing in individual startups now has many options, including online startup companies that match investors and entrepreneurs, angelic investment, and large-scale investment.
The investment in startups has flourished since 2016 due to legislative changes that have had a significant impact on both young entrepreneurs and other investors looking beyond traditional investments in stocks and bonds.
In the past, investing in the private sector was illegal unless you were an authorized investor. Believe it or not, between 1933 and 2016, it was illegal for unauthorized investors to invest in private companies. After that the rules changed to open up a new opportunity for individual investors. Finally, after a number of changes to the previous law, in 2015, the Securities and Exchange Commission adopted rules that, from May 2016, made it legal for investors of any wealth to invest in startups. The name of the law was JOBS Act (Jumpstarting Our Business Startups). The JOBS Act has changed the previous rules and made it easier for companies to collect money publicly and privately. Government-sponsored “support sites” were approved online. This has fueled the subsequent birth and growth of the first online companies bringing together investors and entrepreneurs.
Start-up investments are not just for the rich and powerful. You can invest in the beginning even if you have very little money. You can also make your investment by using any of the platforms dedicated to connecting startups with small investors. However, you still need to be sure that you are doing your due diligence to ensure that you make a reasonable investment.
~ By Rashika Sethi