By: Hem - 20-Feb-2021

Investing in start-ups: Fools job or a genius move

Some prefer it, some despise it but one thing’s for sure, if executed correctly the returns are very rewarding. The risk factor involved is as similar as that of stock market, however once paid off, it can generate exponential returns greater than anyone else. Almost every successful company was once a start-up (Infosys, Wipro, Flipkart to name a few) their IPOs now are worth a fortune. Those people who believe investing in more traditional avenues like bank deposits or anything that has assured returns wouldn’t consider tapping into the stock market so investing in start-ups is a big no for them! What they fail to realize is, even with the risks involved, investing in start-ups comes with its own set of advantages which one simply can’t ignore.

You’re not investing in a company; you’re investing in innovation:

Any start-up founder’s disposition to launch their company is driven by immense ambition & belief in their innovation. In many ways, you’re part of that innovation too. By investing in an idea, you have the opportunity to voice your opinions, provide insights, work on the innovation alongside, be an aid to the entrepreneurs & turn it into success.

Portfolio Diversification: Stock markets come with an abundant credit flow but fewer opportunities to participate in. On the other hand, due to the misconception that start-ups have a greater risk as compared to stock markets, there’s a lack of credit-flow & greater opportunities to participate, because of which early-stage investments turn out to be of fewer risks & greater returns by portfolio diversification.

Greater chances of takeover: For a successful start-up, an innovative idea & the right execution is enough. They could turn in huge profits & as a result of it, big corporations may want to take over your little start-up to mint on the profits. When that happens, you as an investor can expect great returns for yourself. For a successful start-up an innovative idea & right execution is enough. They could turn in huge profits & as a result of it, big corporations may want to take over your little start-up to mint on the profits. When that happens, you as an investor can expect great returns for yourself.

Nurturing the welfare of the communities: At the centre of every start-up is an innovative idea. An idea that aims for societal benefits by providing solutions for the betterment of the society. When you associate yourself with such start-up, you’re essentially contributing to the greater good of the society or the community who’s going to benefit out of the start-up’s innovation. To conclude, every investment is a risk.

However, investing in start-ups & especially early start-ups enables diversification of your portfolio, it has a reduced risk potential, you can voice your opinions, you generate greater returns than other investment avenues. Like we said above, start-ups if executed correctly, can generate exponential returns. When given a thorough consideration & proper research is performed, investing in start-ups could be the most genius thing to do.