In reality, and in honor of the truth, more than passive or residual income, what can mainly be obtained are capital gains (capital gains), that is, benefits obtained by the difference between the price paid for the purchase of certain shares in the company and its subsequent sale.
In any case, investing in startups is an alternative to traditional forms of investment in stock markets, financial products and the like. It is something new, the product of the new economy and the current labor reality, of the digital age of talent and knowledge, which although it can lead to significant losses to those who decide to put their money, it can also make them earn interesting profits.
Investment in #startups as an alternative to traditional forms of # investment – Share it!
We are going to talk, then, in this post, about what a startup is, how you can invest money in it and everything you need to know about it .
What is a startup?
A startup is a newly created company, which develops products and / or services of great novelty, and that can therefore end in a resounding failure or against reaping the greatest success. They are usually developed in the field of Internet and new technologies (many of them online).
Characteristics of them are, therefore:
- Being something of new creation, product usually of breakthrough, disruptive ideas, or the use of lateral or divergent thinking.
- With an important technological component as a rule. Moreover, its technology is its own or implies an important qualitative advance.
- Assume a new change with respect to the existing (high capacity for innovation).
- High volatility or high risk exposure.
- Great possibilities of growth, due to their characteristics that make them easily scalable.
Technology companies lose money in the first years and most of their value is generated in 10-15 years. This is what distinguishes them from the old economy, especially the way they are valued and quantified: for him, the value of a startup is the sum of all the money it will generate in the future
How investment in money works in startups
From what has been commented so far we see that, in principle, although with its peculiarities, a startup is a company like the others that needs financing, investment.
This financing can be provided by the original partners or can be obtained from traditional credit sources (banks, savings banks …). However, the nature of startups causes crowdfunding strategies to be lavished on them : a plurality of people or funds that contribute capital in the amount they decide and assume the corresponding percentage thereof in both losses and profits. Learn how a #startup is funded – Share it!
A startup can open a round of financing both at the beginning, if it does not have capital of any kind, as at a later stage, when it is time to grow and make the leap. This, in other words, could also mean that you may need the investment when you are born or at a later time, when you already have users, customers, consumers, etc. Or said in a third way, there may be several rounds of financing: from the initial (seed phase), to the subsequent rounds that arise for the financing of the different milestones.
The amounts contributed are, of course, documented in their respective contracts, and in this respect, agreements of partners, companies as in the rest of companies and any documents that regulate the relations between the partners, founders and investors can be signed. You can participate in decision making and participate in the boards of directors.
What, in my opinion, is what characterizes this type of investment? That most startups fail, but those that succeed do so well above average. In other words, of every X startups in which you invest, in the majority you could lose money, but when you win you will do it in amounts that can be stratospheric (and if you have invested considerable amounts the figures can be perfectly millionaire).
They are, therefore, operations for people with high risk tolerance and my advice, of course, is that you only invest the money you do not need, the one you have saved, the one that you will not need at least in the near future or means, medium.
To the disadvantage of the high probability of loss of capital are joined by two others:
- On the one hand, the possibility of lack of liquidity, this is to convert the shares you have into money. This does not work like stock markets, in which there is always someone who buys you the shares and also at the moment, in fractions of a second. Here you may want to sell your shares and there is no one interested, so you cannot make them liquid, that is, you cannot convert them into money.
- On the other hand, many times the return on investment, if it occurs, is late, because the benefits are usually reinvested in the project, and therefore it would be an investment strategy rather or medium or long term.
In spite of everything, it is a form of investment that I consider interesting especially for certain profiles. I think that by diversifying well you can get good returns. I have recently started with this form of investment and, as I leave, I will count here :).