Start-up businesses created by entrepreneurs are a vital element of today’s varied and exciting business world. These micro enterprises lead the way with fresh ideas and innovative concepts so it is no surprise that investors are eager to buy into them. Start-ups can deliver exceptional returns, but the rewards are not just isolated to finance. Investment in this area can create new relationships and partnerships, and drive wider benefits such as economic growth.
Smart and savvy
Start-up investment is not rocket science. You just need to be able to identify opportunities capable of delivering returns. Dexter Coleman-Mitchell is a prime example of a savvy businessman who uses his passion for unearthing new opportunities and supporting start-ups to succeed in investment. If you are able to weigh up the pros and cons and make calculated moves, then you are a step closer to beginning your start-up investment journey.
Start-ups are founded by creative, talented and hardworking individuals so it makes sense to get in early and support companies that have been created by friends and extended family to benefit from the passion they have and new ideas they showcase. Your portfolio can often seem like a list of items and numbers so building a personal connection can add something extra to investment. You will be able to put a solid foundation in place to help start-ups to grow and thrive. This can be hugely beneficial if the start-up succeeds and expands into a revenue generating SME or an even larger organisation.
Getting in early
Venture capital has delivered robust returns for more than two decades according to the Thomson Reuters Venture Capital Research Index, so there is a solid case for getting in early, investing in start-ups and reaping the eventual rewards. There are certain risks inherent in this form of investment but the low bar for overhead capital combined with the potential for considerable returns makes it a smart move.
Investing in start-ups will enable you to diversify your portfolio. That can increase the chances of high returns while lowering volatility. A recent study by SharesPost found that allocating a portion of investment funds to private growth enterprises can lead to a double digit rise in returns. If you are a sole investor who has focused on stocks and bonds, you may be struggling with volatility and efficiency. Early stage investments can smooth off the edges of a portfolio and drive efficiency.
Diversify business types
In addition to using start-ups as a way to diversify a portfolio, investors should also diversify the types of micro enterprises they invest in. That means you should look at a range of sectors and industries. Tech is particularly hot right now but there are exciting opportunities in other areas too. Spreading investment types and being savvy by investing by starting small can lay the groundwork for more stable returns.
Know your niche
Diversification is useful if you are an investor with a broad knowledge of business but if you are truly an expert in a single sector or industry it may be best to use this to your advantage. Place a greater focus on this area but still look for opportunities elsewhere. Basically, use your skills and knowledge to balance the types of start-up investments you want to pursue.
Reignite entrepreneurial spirit
Investors can experience the thrill and joy of getting a business off the ground by proxy through start-up investment. You will be able collaborate with people who have the fire and drive to start a new business and will able to put forward your own opinions, and depending on the type of deal you conclude, perhaps contribute ideas to shape its future path.
Create more jobs
New enterprises create many thousands of jobs annually, so investing in start-ups will support the creation of those valuable jobs; however, jobs are just one positive aspect of the investment process. For example, if you buy into a fledgling tech company, you will be able to see at first hand the technology that is shaping our future and how the good work you support is changing lives.
Crowdsourced makes it easier
Supporting a new business can be a daunting prospect, so you will be happy to hear that digital platforms can alleviate some of the burden. Crowdsourcing is a model where a number of donors work together to achieve a cumulative result, such as investing in a start-up. The group aspect will give you a better idea of start-ups that are creating a buzz and that have the potential to create lucrative returns for investors.
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