Investing in startups is one of my favorite places to put (and make) money. I’ve talked before about the criteria for investing in startups, but today I want to share three reasons why you should consider investing today.
The first and most obvious reason we invest in startups is because when that company goes public or gets acquired, you get a massive windfall – oftentimes exponentially larger than the amount you invested. Many payouts will net anywhere from two to one hundred times your initial investment. And when you invest early, you have both the biggest opportunity as well as the biggest risk. Know that if you pick five investments, one will likely succeed, maybe two if you picked very well, but three or four are going to completely fail – but if you’re doing this right, the ones that succeed should make up for any that don’t.
The second reason that we invest in startups is because you can often get paid monthly, quarterly, or annually with either dividends or profit sharing. When this happens, you will get a portion of your investment every month. At some point, maybe a few years down the line, you will get your investment back, and everything on top of that is just bonus income. And that continues until the company goes public or is acquired. It’s a fantastic way to get passive income.
The third reason is a little different. Sometimes you can invest in a company that is less likely to have a massive return or doesn’t pay dividends, but instead offers a different perk that can be hard to find elsewhere: it gives you proximity to amazing relationships. I’ve talked before about the value of relationships, and this is one of the most powerful ways to fasttrack your way into the right circles.
There’s more to investing than just the money. It’s a long game, but it’s one that can have big payoffs down the road.