The Benefits and Downsides of Startup Investment Platforms
It is undeniable that startup investment has become big in the past decade. The market is teeming with new businesses that seek funding and, in turn, offer the investors potentially high gains and an opportunity to be a part of something fresh and exciting. And now, thanks to crowdfunding platforms, this type of investment has become more accessible than ever before. Let’s find out more about the reality of startup investment and why fundraising platforms are the future in this particular sector.
Raising funds for early-stage businesses through an internet platform has become very popular in the last few years. The platforms create opportunities not only for startup owners who are looking to fund their businesses, but can be a very lucrative source of profits for a number of investors with varied network values. One of the main reasons is the increased accessibility and lower entry barrier for investment on such sites. It is a method well-adjusted to the present reality of globalization, as it allows startup owners to gather supporters and investors from all over the world. In particular, equity crowdfunding-based sites allow investors to receive unlisted shares in the business for their financial contributions. By becoming a shareholder the investors can then profit from the rise in share prices, once the business sees success on the market.
There are various benefits to using crowdfunding sites. First of all, a low entry barrier means that people from diversified economical backgrounds can become investors, support projects they are interested in and gain profits from them in the future. On the other hand, it allows company owners to find contributors that are actively engaged in their projects. Crowdfunding additionally makes it possible to acquire funding while simultaneously marketing the product or service and gaining first supporters and potential clients.
The benefits and downsides of startup investment platforms
The increased interest of investors in startups, as specifically investment via crowdfunding platforms, is not unfounded. The many benefits include:
- Diversifying your investment portfolio
A considerable advantage of startup investment is the large variety of businesses that could become a part of your portfolio. Crowdfunding platforms offer investment opportunities in startups from virtually any field you find yourself interested in.
- Potentially high return on investment
While this type of investment comes with a big risk, backing a successful business can bring a huge return on investment. Using crowdfunding platforms can help projects gain traction faster, which in turn will be beneficial to investors who backed the business at its early stages.
- Generating long-term profits
Investment in startups typically means looking at the substantial long-term profits they might bring you. Some crowdfunding platforms can also offer help and some guidelines in the commercialization process and making the business work long-term. They are also a good option for businesses that want to start building profits.
- Lower investment threshold
Crowdfunding platforms opened the doors for investors with a smaller capital. Low entry threshold also allows you to make more investments and dilute your risks.
On the other hand, a smart investor must keep in mind some shortcomings and risks of different types of investment. Startup investment downsides include:
- High rate of startup failure
Startup investment comes with high risk – it is estimated that 9 out of 10 startups end up failing; so while there is the possibility for a high return, there is also a chance the money you invested will be lost. However, investing in one largely successful project can make up for investments you made into startups that failed – often with a big margin of profit.
- Rarely a fast return on investment
Startup investment is a long-term commitment and it’s likely you will only be able to access the money you put in the business only after the startup goes public or gets bought.
Make smart decisions
As you are now aware of hazards that are involved in startup investment, there are a few steps you can take to minimise the risks. Above all – try making informed decisions. Not only when it comes to choosing startups to support but also while picking investment platforms. It is advised to browse through different articles or forums that can recommend reliable websites, as well as help you choose platforms that are most suited for your individual needs. Secondly, as mentioned before, it is a smart strategy to diversify your investment portfolio. Putting money into projects from different fields increases your chances of a successful investment. However, instead of blindly putting your funds into a number of random startups try to choose those that strike a chord with you.
If you’re interested in becoming a startup investor, we encourage doing further research on the subject. Easy access to investment platforms and many good investment opportunities should be taken advantage of. Best of luck!