When you invest in a startup, your top concern is potential exit scenarios.
How long until your investment pays off?
In this industry, the answer is more complicated than on public markets.
And the state of the overall economy seems to only further cloud the outlook. With inflation and the cost of borrowing pressing issues, we’ve seen the capital available for startups constrained.
As a result, there has been a drop in the number of IPOs and takeover bids from established companies.
However, while this uncertainty has left investors in every realm scratching their heads as to the best course of action, angel investors’ plans are relatively unchanged.
That’s because these potential exit scenarios are years down the line. What has been a negative for many prospective angel investors has quickly turned into a positive, as threats of a recession leave investors looking for places to hedge against inflation.
For this, there are few places that offer better potential than angel investing.
Inflation continues to whittle away the value of cash reserves and the stock markets just ended the worst first half of a year in 56 years.
However, startups are playing a different game.
Your money actively helps a company realize its vision for growth. And if that company succeeds, its potential isn’t capped by present-day market conditions.
This long-term horizon provides a relative safe haven for your money, as you’re securing a stake in companies that offer the potential for life-changing gains.
At a time when risk pervades every channel of the investment world, the risk of startup investing is offset by the outsized reward of success.
And despite the downturn in investment from the venture capital realm, there will undoubtedly be winners to emerge from this unsure footing.
Meanwhile, that downturn from VCs is actually a positive for angel investors in the crowdfunding space.
Where the landscape of startup investing was thrown into hyperdrive the past couple years, thereby driving the valuations of startups through the roof, the current climate has had the opposite effect. With less competition for investment, the terms grow ever more favorable for those securing a stake.
So, while exit scenarios could be pushed a little farther down the road, the potential return on investment remains unmatched.
As you know, success in the startup world relies on three factors: the right team, with the right idea, at the right time.
Many people assume a recession is the wrong time, but history shows that some of the most successful companies were born amid overwhelming financial uncertainty.
Those companies emerged on the other side – in a far healthier economy – better off for enduring these trials and tribulations.
And early investors sit pretty.
The most important thing is aligning yourself with the types of startups best positioned to reach those heights.
The types of startups the Angels & Entrepreneurs Network sends to its subscribers on a monthly basis…
The Angels & Entrepreneurs Deal Team