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Crowdfunding platforms are the easiest way for the average person to invest in startups.
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Startup investment opportunities used to be limited to accredited investors with connections.
But today, there are many opportunities for everyday investors to invest in startups.
There are risks to investing in a startup, so you should do your due diligence on the company.
Every successful company began as a startup looking for investors who saw the value in its business idea. Startup investments used to be limited to high-net-worth individuals. But nowadays, everyday investors can also get involved.
See Insider’s picks for the best investment apps >>
What is a startup?
A startup is a recently formed company that that’s looking to scale quickly. Startups are typically founded by a small group of individuals with a unique business idea that they want to turn into a reality.
In the beginning, most startups have high costs and minimal revenue. Depending on the type of business, it could take some startups years to earn a profit. For that reason, most founders try to raise funds from venture capitalists and investors.
For example, Airbnb started in 2007 when its founders saw an opportunity to earn extra money by renting out their home in San Francisco. Today, Airbnb has 6.6 million active listings worldwide in over 220 countries. But it took years for the company to receive the funding it needed, and eight years to become profitable.
“Despite a startup’s success, it may take several years before your investment yields any returns,” says William Bevins, a fiduciary financial advisor and CFP® professional.
How are startups funded?
There are typically three different ways you can fund a business:
Bootstrapping (self-financing)
Taking out a loan
Finding investors
Because of the high costs associated with running a startup, bootstrapping isn’t always the best option. Plus, you risk losing your savings if your business fails.
Taking out a loan allows you to retain full ownership of the startup, but you’ll have to begin repaying the funds with interest immediately. Plus, applying for a loan from a bank or the US Small Business Administration can be tedious and time-consuming.
That’s why most startups raise money …read more
Source:: Business Insider