Here’s All You Need To Know About Rewards And Risks Of Startup Equity Investing

You might have noticed how there has been an increased focus on businesses and entrepreneurship lately. Governments are providing subsidies while encouraging the younger generation to enter the field of business through educational initiatives and monetary support as well. There are many business opportunities that you can benefit from, like starting a hair salon or opening up a new restaurant. Still, if you are looking for something that is rewarding, then you might want to check out equity investments startups.

Burak/Pexels | Doesn’t owning shares of a successful company sound promising?

For a long time, equity investment startups have been reserved for angel investors or venture capitalists who have no shortage when it comes to funding, but times have changed, and so too have the businesses. Thanks to many crowdfunding sited and digital platforms, it is now possible for retail investors to jump into the world of investing in startups.

High Risk, High Reward

The thing about startup equity investing is that it is high risk in nature; if you invest a certain amount of money into an investment and it fails, then you have to bear the huge loss, but on the other hand, if the startup that you are investing in takes off then you are bound to get some great returns from it. According to Ram Kalyan, the founder and CEO of Jama Wealth, startups have the highest risk-reward ratio.

Rfstudio/Pexels | Startups boast immense growth potential

Risky Business

Before you jump into investing in a startup, you should be well aware of the situation, the risks that it comes with, and the rewards it may wield. The only and main factor that dictates whether you will be successful or not is the success rate of the startups in your country. The managing director of Resurgent India, Jyoti Prakash Gadia, mentioned that the success rate of startups in India is acournd10%-20% only and around 80%-90% of Indian startups fail within the first five years of inception. Because of this scenario, experts suggest you only invest the amount of money you think you can afford to lose.

For retail investors, exit options are available through an initial public offering, secondary sales, and acquisitions. However, for investors, it is important to understand the startup and measure its ability to succeed before jumping in to invest.

Cottonbro/Pexels | You can look into digital platforms like Tyke and Grip, which list startups looking for funds raising.

With Tyle, you can become a retail investor with the starting amount of only 5000 INR ($62.5), while Grip, on the other hand, asks for the minimum investment of 200k INR ($2,500), but you have to be an accredited investor to start. The risks are right before you, but what about the rewards? Once the startup shoots off, you are entitled to your share of profit almost instantly, providing great returns. However, one thing that experts suggest is to make sure you do your homework before jumping into any investment.

So, do you think you want to give equity investment a chance?