We’re living during an information technology revolution—computer software and hardware technologies have become so indispensable to us and our economy that now a world without them seems incomplete.
The digital revolution that began in the latter half of the 20th century is now a main driving force globally. The advent of the internet has changed everything and redesigned and redefined the modern economy, enabling extensive software, supply chain, and modern manufacturing, but the revolution is nowhere near its end.
In a time like this, tech startups are nothing short of being idealized; they’re what started this revolution in the first place—Apple started in a garage, Facebook was created in the Harvard dorm room, and so was Google. Imagine, where would these tech-giants be if those investors had not decided to take a risk? Tech startups are nothing insignificant; they’re the inventors, influencers, and drivers of change.
However, until the last few years, startup investing was very limited—something only the ultra-wealthy did. People can now openly invest in startups even if they don’t come from a very influential and stable background; however, this is a risky business that should be traversed with care. But, if the stakes are right, the investment risk can prove to be very rewarding when the investments finally do pay off (if and when).
One has to remember that the majority of new companies or products don’t make it (due to lack of resources, insufficient market research, and more). The ones that do make it; however, produce significant returns on investment.
Investing in startups isn’t for the weak — it’s easy to lose money, but the risk is worth it for many. However, noticing how leading angel investors and venture capitalists are investing in tech startups, it’s time to wonder whether it’s a good long-term opportunity for us to be a part of.
Here are some very notable advantages of investing in tech startups:
You Can Get a Larger Share of Ownership
During the initial stages, tech startups require a good amount of capital investment to start their operations. As a result, if you invest in a tech startup during these early stages, you can get a higher value for your investments by holding larger shares or even gaining ownership.
If the startup gains traction, you will consequently get higher profits as well. However, if you end up investing in large tech giants, your investment share will be next to nothing.
A Better Social Capital
There’s a huge difference that you can make when you decide to invest in small startups. Your investment toward a startup will contribute to enhanced social capital, which is the main driver behind impact investing. You could help small startups discover new solutions that they might not have thought of before. Modern startups are always searching for new ways to help humanity, a way to simplify life. This way, your investment can also align with your personal goals, values, and objectives.
Higher Returns
Investing in established and financially able companies promises stable returns, but actually, the returns aren’t so much. So, if you risk investing in startups, it may be your golden ticket to an unfathomable amount of returns. Of course, there’s no knowing how the startup might do eventually, but that’s where you have to be smart.
There’s Room for Growth
Amazon was initially a book store that, over time, evolved into this eCommerce giant that we know today. With its super cool games and electronics, Nintendo once owned a TV network and ventured into food and hospitality—surprising, right?
That’s the thing with startups; they’re super scalable and versatile; they can grow into diverse fields. Because startups don’t need a lot of infrastructures, they’re more flexible, too; when the need comes, they’re ready to pivot according to what the market wants. They’re progressive, technologically adept, and innovative, which slows them to grow and evolve.
Better Tax Incentives
Governments are always looking for new ways to use entrepreneurship to somehow boost the economy. And, to give startups a better chance of existing, they often give tax deductions, breaks, rebates to attract potential investors.
Why is that beneficial? Because such incentives work in mutually beneficial terms. Firstly, the investors benefit by paying lower taxes on capital gains, making the startup a prime investment place. Secondly, startups impact the economy deeps; they can grow and impact the industry they belong to.
So, Should You Invest in Tech Startups?
Tech startups, though risky, have immense potential to create rippling revolutions in whatever industry they’re targeting. Hence, it only makes sense to make the best of this opportunity to build profits.
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