by Kaitlyn Ranze
A startup is a company or organization in its early stages. They are often founded by entrepreneurs who pursue innovative new ideas in the hope of changing an industry, making an impact, and achieving financial success (and apparently going to space).
Unsurprisingly, startups also require money to grow, and one common way they obtain funding is by investors. Investors are people or organizations who provide money to startups in exchange for a percentage of the company’s ownership or future profits. Think Shark Tank, but with more paperwork and fewer lights and cameras.
Startups can also generate money through other means, such as sales or government grants. However, without money from investors or some other source, most startups will fail.
Why invest in a startup
Startup investing is a great, albeit risky, way to make money. With the right investment, you can see a return that is much higher than if you had invested in a more established company, especially if you land a unicorn. Additionally, investing in startups can be a lot of fun with evolving innovations and creativity. Finally, it’s a great way to support the entrepreneurial ecosystem. By investing in startups, you are helping to create jobs and grow the economy.
The problem? You can’t invest in most startups because they don’t exist in the public market. Rather than the stock market, startups exist in the private market. This means, unless you’re really wealthy and have access to sweet deals, you can’t get in on the action. That is until some legislative changes in 2012 made it possible for you to invest in startups without being a millionaire and crowdfuding started popping up in 2016.
The least expensive and most accessible options for startup investing: crowdfunding.
You’ve heard of GoFundMe to cover medical or funeral expenses. You may have even heard of Kickstarter, where you invest in companies to help products get launched. But have you started using crowdfunding for startup investing?
What is crowdfunding?
Crowdfunding is a way to raise money for a cause or venture by collecting small amounts of money from a large number of people. It’s often used by startups and small businesses to raise capital, but can also be used for charitable causes and other projects.
How does it work?
Individuals or organizations seeking funding create a campaign on a crowdfunding platform. They set a fundraising goal and provide details about their project or cause.
People interested in supporting the campaign can then make pledges to donate money. If the campaign reaches its fundraising goal, the money is collected and transferred to the campaign creator. If the goal is not reached, no money is collected.
What are the benefits?
Crowdfunding can be a great way to raise money for a project or cause that might not otherwise have access to traditional funding sources. It also allows people to directly support the causes they care about. Best of all, it increases access to these types of deals.
What are the risks?
Before you get started, remember that many startups fail and leave investors with nothing. It epitomizes high-risk, high-reward, so only invest as much as you can afford to lose.
Before investing your hard-earned money in a startup, ask yourself these 10 questions:
1. How much money are you willing to invest?
2. What is the minimum amount required by the startup in order to get started?
3. How well do you know the entrepreneur behind the startup?
4. What is your level of risk tolerance?
5. What is the potential return on investment?
6. What is the timeline for the startup to achieve its goals?
7. What are the conditions of your investment?
8. Have you done your due diligence on the startup?
9. Do you believe in the vision of the startup?
10. Is this a good fit for your portfolio?
If you’re convinced that this is the right move for you…
This is how you can invest in a startup for as little as $150.
First, you need to find a crowdfunding site that deals with startups. There are many to choose from, but do your research before investing. Some sites are better than others, and you don’t want to put your money into a site that isn’t reputable. You can try one of the following:
Once you’ve found a good site, take a look at the startups that are looking for funding. Read their business plans and see if you think they have a chance of succeeding. If you like what you see, invest money in the startup. You can usually invest as little as $150, so it’s not a huge risk.
Why we like Republic
Investing in a startup is risky, but Republic does a significant amount of due diligence to ensure the best financial outcomes for those using its platform. After all, there’s a less than 5% acceptance rate from thousands of startups applying on the platform.
Check out Republic, the online platform that makes it easy for you to invest in startups. Here’s how it works:
First, create an account and browse through the list of startups that are available for investment. You can filter by industry, location, or stage of development.
Next, read the overview and decide if the startup is a good fit for you.
Finally, invest your money. You guessed it – for as little as $150.
Republic makes it easy to invest in startups, but it’s important to remember that there is always some risk involved. We can’t emphasize this enough: be sure to do your research and only invest money that you can afford to lose.
There are a TON of options out there, navigators. The point is the build and generate wealth on YOUR terms. There’s nothing stopping you from being the next Warren Buffet, especially with the tools to trade at your fingertips. Just remember the importance of a few things: these investments are less liquid. If there’s a chance you’ll need that cash, not only could you not have access to it, but you may lose your money entirely given the riskiness of startup investing. That’s why it’s so important to learn about risk, return, and diversification investing. It could save you.
Related Reads:
Risk, Return, and Diversification
Break into Startup Investing Even if You’re not a Millionaire
Hear the Story of How Nav.it was Founded in this Episode of the Podcast
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