Investment Strategies for Successful Startupsby Emma L. Business consultant
When someone says startup, the first thing that comes to mind for the majority of people is a fresh business on the market that's struggling to make its way to the top. However, not all startup businesses have difficulties making a name for themselves.
More often than not, the success of some startups is ensured from the very start due to the fact that their business idea is well suited for the market demand. These days, tech startups are the ones that have the tendency to be very successful even before they place their product on the market.
That said, what to do with considerable profits and capital when you no longer have to worry about business survival? The most logical step would be to invest in something else other than your business. That way, you'll have assets that will either open new doors for you or allow you to expand your business in the future. With that in mind, here are a few investment strategies for successful startups.
Real estate investments
Real estate is probably one of the most beneficial investment types for not just successful startups but for any business in general. The main reason is that companies are always in need of properties, whether for an office space or for a manufacturing plant. In any event, even if you don't need a real estate property for your business, you can still benefit from owning one.
For instance, real estate can be a good liquid asset, meaning you can sell a property whenever you're in need of cash. You can either wait for the market place to go up or invest in renovations to increase the property price regardless of the current market conditions. In addition, real estate can also be a good additional income source as you can enjoy a rental income should you decide to hold on to the property.
Every successful business will eventually enter the stock market. Such companies also like to invest in other stocks. However, only investing in shares of other companies can be risky. That's why a better alternative would be to invest in ETFs, especially for businesses that are not familiar with how the stock market functions.
The main reason is that ETF stands for Exchange-Traded Funds, which is basically a combination of securities, such as stocks, bonds, commodities and so on. In other words, these assets are already considered as a portfolio diversification method. Portfolio diversification has a purpose of minimizing, as well as mitigating, the risks involved with any investment type, which is very beneficial for startup businesses that are just starting to explore various investment strategies.
Venture capital investing
As mentioned before, investing in other company shares through the stock market is not uncommon for successful startups. However, there's also another approach to that matter. If you want to invest in another startup, you might consider venture capital.
What it means is that you financially support another startup business that has the potential to become not just successful but also profitable within three to five years. As a return on investment, you get the shares of the company once they're ready to enter the stock market. In addition, you become one of the key stakeholders of that company.
Still, you must be careful when you choose which startup to invest in. Even though a business has the potential, you must be certain that they can actually manage to reach success. That's why venture capitalists demand financial projections, social proof, business plans and other relevant factors for assessment before they decide to invest.
Similar to venture capital, angel investment has a slightly different agenda, as well as the outcome. You get to invest in another startup but you're not supporting fast profitability. Instead, your supporting passionate entrepreneurs that are willing to make a difference and have some sort of a positive social impact.
In return for your support, you get at least a 25% return on investment (ROI) and you don't ask for any shares of the company. Furthermore, like with venture capital, you must be certain that the startup you invest in can actually become successful in the future.
Successful startups get to enjoy profitability early on. Making some kind of investment with excess capital is, therefore, a good strategy. However, which type of investment you'll opt for is up to you but it's important to know your options beforehand.
Created on Sep 27th 2019 04:07. Viewed 262 times.