What Are The Benefits Of Investing In Startups?

Investors are people who buy shares of a company in exchange for money. Anyone who invests in your startup is an investor—they want to see returns on their investment! But it’s not as simple as buying stock at the start-up’s initial public offering (IPO). You’ll need to work out how best to incentivize investors, and what kind of return can we expect from them.

New age Indian businesses have listed on stock exchanges. These include start-ups such as Paytm, IndiaMart, Zomato, Nykaa, CarTrade, MapmyIndia, EaseMyTrip etc.

There has been an ongoing debate within India recently owing to the price of new age tech. companies listed on the Indian stock exchanges falling from their peak. Investing in start-ups can be very risky, but it can also be very rewarding if investment pays off. Majority of companies don’t get the desired launch due to various factors like their product lacking USP to become successful in a competitive market, thus the risk of losing investment is high. Yet, the ones who do make it, can produce very high returns on investment.

A prime example of a successful start-up which made it big is Alphabet Inc., better known as Google. The search giant launched as a start-up in 1997, raised 1 Million$ in seed money from FF&F. In 1999, the company was growing and attracted US$ 25 Million in Venture capital, with two VC firms acquiring around 10% each. In August 2004, Google’s IPO raised over US$ 1.2 Billion for the company and almost half a Billion $ for those original investors, a return of almost 1700%.  

Investing in startups is no longer for venture capitalists or wealthy individuals: anyone with cash can invest these days. This means that many Indian start-ups now have access to outside funding from venture capitalists or private equity firms. The best way to find these investors is through online platforms such as AngelList or FundersClub.

Are you an entrepreneur looking for funding for your start-up? If so, it can be hard to know where to begin. But don’t worry! We’ve got you covered.

1. Start by thinking about what kind of investor you want to find. Are you looking for a seed round, or do you want a small amount of capital for the first year of operations?

2. Then, think about where that investor would be located—is it likely that they’re based in India or elsewhere? Do they have experience investing in Indian companies?

3. Next, consider whether the investor will know anything about your industry and what kind of expertise they bring to the table. If they’re not familiar with your industry, they may not be able to provide helpful advice and guidance as well as other investors who understand it better than them (and who might even know more about how startup financing works ).

4. Finally, make sure that the investor has experience investing in start-ups and understands how much money they should be able to invest at any given time.

Some of the emerging areas where accredited investors might show interest to invest in would be Climate Start-ups. Climate Start-ups are start-ups which help fight climate change by innovating and investing in cleaner technologies and renewable energies to meet the increasing energy demand of the society. Recently Solar Squares raised Rs. 100 Crores as a part of Series A funding, on the back of Rs. 30 Cr. seed round 3 months earlier. This is typical of climate start-ups. 

VC Investors seek to invest in firms that address large opportunities that can grow multifold 6-7 years. Some climate sub sectors have started to present such opportunities where technology and market acceptance risk have already been met. For example: India is one of the largest markets for renewable energy, with its solar energy alone set to quadruple by 2030. Government policies like Production Linked Incentive (PLI) also support local production of components such as solar modules and cells. 

While investment in climate solutions is growing, climate start-ups account for less than 5% of Venture Capital funding in India, as estimated, and it goes to tech start-ups. This shows the huge amount of potential that climate start-ups have.

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