Financial Investment is putting your money into assets to generate income in the future. There are various kinds of investment, and it is crucial to understand each of these verticals before getting involved. Mutual funds, Funding Startups, Real estate, stocks, Bonds, Trading, Commodities, fixed deposits, Cryptocurrency, and hedge funds are some of them.
The Startup is a venture that is in its initial phase of business. Founders are selling an idea of their business to investors to fetch funds to fulfill their initial financial needs.
As per the reports published in Indiabiz.gov.in, Commercial Minister Piyush Goyal quotes that as of 2023, there have been more than 1,00,000 registrations in India under Startup ventures. Further, India is encouraging entrepreneurs by introducing various schemes and programs to welcome the vertical.
Read on to learn more about Investments, the importance, Advantages, and potential risks of investing in Startups.
The two vital aspects of any investment are Return and Risk. Investment is a risky business in itself. The risk of investing in startups is higher because you are investing in an idea. There is this real possibility of losing the entire investment if the Idea doesn’t make it. Investment is putting your hard-earned money into circulation and building wealth. Here is why you should emphasize more on investing.
- To create a stable income platform for yourself and your family.
- To be Financially independent.
- To Enjoy a Secured Future.
- To Avail of tax benefits.
- To be able to meet growing expenses, etc.
The advantages of investing in Startups:
Investing in a startup is an opportunity to be part of a potentially successful company. Here are some of the benefits that come along with your financial decision
- Potential growth: If you have made the wise choice of investing in the right venture with viable terms and conditions, you have a higher chance of making significant returns on your investment.
- Source of Innovation: By investing in startups, you are also encouraging entrepreneurs to bring Innovation and new technology to the world, thereby taking part in something commendable.
- You feel valued: Generally, the new entrepreneurs are open to ideas, guidance, and suggestions. As an investor, You get a chance to put in your thoughts and share your experience, thereby helping in the success of your business.
After looking at the bright side of investing in Startups, let us also look at some unavoidable risks and uncertainties.
The potential risks of investing in startups are:
- Risk of venture failure: As a new venture, it may fail to get off the ground for various reasons. The risk involved with the failure of ideas, projects, or products is comparatively greater.
Contrary to popular belief, the notion that over half of new businesses fail within their first year is not entirely accurate. Statistics provided by the U.S. Bureau of Labor Statistics (BLS) reveal a different story. The data indicates that approximately 20% of new businesses experience failure within their first two years. 45% within the first five years and 65% within the first decade. Only a commendable 25% of new businesses manage to survive beyond 15 years or more. - Competency risk: Startups operate in a highly competitive and dynamic market environment. Their success not only depends on their ability to execute their business plan but also on market conditions and trends.
- Longer wait time: As investments in startups are illiquid, even if you wish to exit, you might have to stay invested until the venture makes fair enough to pay back the share of profit or return on investment.
- Lack of transparency: Investment management is vital. An investor makes a decision based on the track record of performance to assess the probable returns. However, Startups have limited financial and operational history, making it difficult for investors to foresee the risk.
To conclude, investing in Startups has both pros and cons. If you wish to dive into this investment vertical, you also must be updated on business trends, investment patterns, market behavior, and overall aspects of investment.
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