If you've always dreamed of striking it rich as a start-up investor, you may worry that you'll never be able to afford to buy into a risky venture. However, while many start-up businesses do rely on wealthy venture capitalists to bankroll their expenses until the revenues begin rolling in, there are some platforms that can allow you to invest without dropping a sizable portion of your net worth into a single company. Read on to learn more about how you can invest in a start-up company without already having millions in the bank, as well as what you'll want to consider when choosing a company in which to invest.
What start-up investment options have the lowest barriers to entry?
The rise of crowdfunding sites has changed the way many start-up companies do business. Instead of seeking a few extremely wealthy investors and handing over a certain amount of decisionmaking power in exchange for this funding, some start-up entrepreneurs have elected to solicit multiple investors for much smaller amounts, giving up less company control while still allowing investors to share in company profits.
Many websites have been set up to facilitate these transactions, giving you a sortable list of businesses in which you could potentially invest. These businesses can range in size and function from an enormous brewery seeking to expand its footprint to a medical development company operating on a shoestring budget and unable to finance important diabetes research. This online investment platform can give you an easy, streamlined way to conduct your pre-investment research and winnow out companies that don't interest you so that you're left with a list of viable investment options.
Some businesses that utilize these sites may set a minimum investment amount, while others have fully adopted the crowdfunding model and permit investments of all sizes. Many will also provide specific perks to those who invest a certain amount, from free merchandise or meals to naming rights to a building or aircraft.
What should you consider before selecting a start-up investment?
If you're serious about investing in a start-up company, you've probably already made yourself aware of the risks -- particularly the lack of liquidity. Unlike more traditional stock and bond investments, investments in a start-up company aren't usually able to be withdrawn upon short notice, and you may find that your funds are tied up for years or even decades before the company is able to pay its investors back. It's important not to use the money you'll need in the short term for a start-up investment.
You'll also want to carefully evaluate the business plan and financial status of the companies you're considering -- ideally, with a financially-minded partner. It can be easy to fall in love with a specific business or idea and ignore any red flags that may be present, so having a more neutral partner is key in ensuring your investment doesn't lose money.
For further assistance, contact local professionals, such as those from Seed Equity startup investments.