Updated: Oct 25, 2022
There is absolutely no doubt when we say startups are the beacon of focus in the twenty-first century. Some great startups surround us in society who are working day and night to create recognition for themself while working on societal problems. You probably have an idea of what startups are either from what you have heard or seen on the internet. You might have an image of a startup as a gathering of folks who come up with an extraordinary business idea in their garage! Yet, this is only a filmic assumption of a startup. A real startup doesn't always have to start with a team and definitely not in a garage! Well, not disagreeing with the fact that we have seen some great startups coming out of garages.
Today startups are widely recognized as the growth engines of the nation. They are the primary source of job generation and technological upliftment of a nation. They create impactful solutions via innovation and scalable technologies. They play a significant role in socio-economic development and transformation.
"Investing in startups is a risky move," we have heard many people saying out loud. But why do people and organizations continue to invest in them? Despite the high risks, venture capitalists, angel investors, and other groups continue to invest in firms. So, what makes people and companies want to invest in it? Here are a few reasons on why investing in startups is a blessing in disguise:
When you invest in startups, you are fueling the job creation process and powering innovation. Innovation is crucial to keep yourself, and the world updated in this fast tech world. Startups are creating numerous job opportunities in the community. Startup businesses created over 3 million jobs in 2020 alone. Startups are the best options for investors looking to create an impact and support job creations in their community.
Startups usually develop products and services that focus on customer needs and requirements. It is a win-win situation for both the investors and the startups. Their ideas get the much-needed financing while investors get their return on investment.
Diversifying your portfolio
It is not practical to always put your fortune in one place. There is a high chance of losing the bid. To avoid this, investors look to diversify their portfolios by investing in a wide range of companies.
What better way to invest other than startups? Startup investment is quite different from traditional bonds, assets, and stocks. It is easier and has a higher potential for success. In addition, startups are less vulnerable to market fluctuations. Therefore, startups are the best to diversify an investor’s portfolio and reduce financial risks.
An enthusiastic team can make or break a startup. A founder with high emotional intelligence and excellent communication skills can drive his team towards success in no time. It is fruitful for an investor to look for a fantastic team behind the startup rather than the financial aspects of the startup. A superior goal-oriented team is what is necessary for a successful startup.
Most of the existing startups start by understanding the gaps in the market and work on filling those gaps with their product or service. According to a global study by Equidam, updated in 2019, the average startup forecasts a revenue growth rate of 178% for their first year, 100% for the second, and 71% for the third. Investing in a startup can allow investors to be a part of something new, exciting, and innovative. While some investors prefer the safer and passive option, people who invest in startups often prefer a hands-on approach by offering advice and perspective for the startups.
Investing in startups must not only be based on the solid business model but also the feeling of personal fulfillment that you get while helping out a founder working to make this world a better place to live. The Government of India has taken several initiatives to spark the entrepreneurial spirit. It has successfully helped and guided numerous startups in the country. Moreover, startups have brought dynamic cultural shifts in the community, so why not contribute to the betterment of society?