Investing In Startups

If you wanted to invest in an existing public traded company you would purchase shares on a stock market but if you want to invest in a company which isn’t publicly listed or hasn’t even started trading yet you can do so through one of three ways. Investing early in a company has the potential to offer much higher returns on your investments (sometimes over 1000x). But there is a much higher chance of your investment going to zero so it’s important to do your due diligence.

Angel investing – This is generally for high net worth individuals who have experience investing in start up companies usually in return for a share of the company. Angel investing has been made popular through shows such as Dragons Den and Shark Tank. Sometimes they are groups of individuals who pool together to each take a share of the investment. If you are such an individual you can join angel investing groups.

Crowdfunding – Similar to angel investing but open to a lot more people who want to speculate with a smaller amount. You can find start ups to invest in using a crowdfunding website. It works in a similar way to angel investing where a company may offer up equity or other benefits for investing in their company. Generally you don’t get repaid on your investment directly but will benefit from the capital growth of a company or some other benefits explained when you invest.

Peer to peer lending – This is much more similar to a traditional loan where you are the lender of the loan. But instead of lending the whole amount lots of people can put up a small part of the whole loan to receive a fixed percentage interest until the loan is paid back. These can be quite a high percentage (sometimes over 20%) because there is a much greater chance the company will default on the loan.

Recommended Reading

Equity Crowdfunding – The Complete Guide For Startups And Growing Companies.

Crowdfunding Basics In 30 Minutes – How to use Kickstarter, Indiegogo, and other crowdfunding platforms to support your entrepreneurial and creative dreams.

Sites to use

Crowdcube – Raise money for your business or invest in companies in return for equity.

Seedrs – Raise money for a startup or invest in businesses.

GoFundMe – Fundraising for individuals, groups and organisations.

KickStarter – Worlds largest funding platform for creative projects.

Indiegogo – Specialising in tech startups and entrepreneurs.

Crowdfunder – UK based crowdfunding.

Forge Global – Secondary market allowing startup investors to sell shares in companies.