When investing, your capital is at risk.
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Choosing to invest in startups is risky business. But that doesn’t mean it shouldn’t be part of your investment strategy.
While it may be true that 60% of UK startups close their doors within the first three years of business, founders who failed the first time have a higher success rate the second time.
If you’re in the right place at the right time, there’s a chance you may just invest in a startup that becomes the next big thing.
Snap Inc is a great example of this. In March 2017, the social media tech giant went public with a valuation of $25bn. Lightspeed Venture Partners previously invested $8m in the company. At the time of the IPO, their shares were worth $2bn!
You don’t need to have millions either to invest in startups and see high returns. With Seedrs, you can start investing in private companies from as little as £10. In 2016, Mindful Chef set out to raise £400,000 for their recipe-box chef company. They exceeded the target by 250%, raising a total of just over £1.02m from 189 investors. In 2020, marking our 7th exit of the year, Nestle bought a majority stake in Mindful Chef which was a big win for investors!
But if that didn’t convince you, here are our top 5 reasons to invest in startups:
You should be diversifying your portfolio.
Diversifying your portfolio is the practice of spreading your investments. For example, you may invest in property, a startup, crypto and high end jewellery. This helps you reduce volatility of your portfolio and protects you from losing all your investment assets. For example, if the housing market crashes, your other investments may at least be unaffected.
The returns are much, much bigger.
Big risks can sometimes pay off and land you big rewards. Let’s look at Google who launched in 1997 as Alphabet with $1m in seed funding. By 1999 they were growing rapidly and raised $25m in VC funding for a 10% equity stake. Google went public in 2004, with their IPO raising over $1.2bn for the company, and almost $500m for the original investors. This was a return of almost 1,700% – a higher than average ROI.
Whilst past performance of startups cannot be a guaranteed measure to predict future success, with the right due diligence, you may find a diamond in the rough.
You can get income tax relief if you’re a UK taxpayer.
Yes, you heard right. Due to two government schemes – Seed Enterprise Investment Scheme and Enterprise Investment Scheme (S/EIS) – UK taxpayers can claim income tax relief and receive no capital gains tax when they invest in an early-stage business.
The scheme also protects the investor. If a company does well, you see a ROI. If a company doesn’t do so well, you get a percentage of your investment back, minimising the financial loss.
You can learn more about it here.
Investing in startups is now possible, take advantage of it!
It was not too long ago that investing in fast-growing companies was reserved for high net worth individuals or VCs. Now, with platforms like ours, anyone can be an investor and build a portfolio.
Making investing accessible is something we’ve had to fight to do, but all for good reason. There’s a clear benefit that we believe everyone and anyone should have access to. So for that reason, we encourage you to take advantage of the options available to you.
Add purpose behind your investment.
Financial returns are great but sometimes nothing beats the intangible – and the numbers are proving this true. In the UK, social impact investing increased from £833m in 2011 to £6.4b in 2020. A growing number of investors are willing to back businesses that have an impact on society and the world we live in.
Oddbox rescues odd and surplus food with the aim to reduce food waste and encourage conscious consumerism. The UK is the biggest food waste contributor in Europe, throwing away 9.5 million tonnes of food a year. Oddbox works with grocers to redistribute fresh food and give it a home instead of letting it end up in a landfill. To date they’ve saved 27,317 tonnes of fruit and vegetables (equivalent to how much food 59,384 people would eat a year) and 2,868 million litres of water (equivalent to how much water 48,508 people would drink in their lifetime).
Some of this wouldn’t have been achieved without the help of investors like you. Oddbox has raised over £7.1m on Seedrs and some of these investors have seen over 3000% ROI. They’re creating a better world for humanity, the money is just a byproduct.
Not sure how to get started with investing in startups? Learn how to invest here.
If you’re ready to make your first investment in a fast-growing startup, check out these live active campaigns here.
