When there is not enough basic income or bond income, many start looking for information about what is venture capital investment and how to make money from them. Everyone is attracted by the opportunity to make a quick profit, but not everyone is aware of the possible risks. And if we talk about entrepreneurship, you can lose everything.
What is it, pros and cons
if speak in simple words, venture capital investments it is a risky investment in any business, currency, start-up. On the one hand, by investing money in such a venture, you can lose everything, but those who are lucky in some cases receive 1000 or more percent per annum.
So, for example, when you buy shares in a little-known company, you can either forget about the money you spent or sell them a few years later at a ten times better benefit.
You've probably heard of companies like Zoom, Uber or even Google. They weren't always leaders in their niche, no one could guarantee that they would grow. However, if an investor previously invested $ 10,000 in them, now, after the companies take off, he can sell a share for much more. It is worth noting that the yield depends on the investment period, usually around five years.
If there is only one advantage of risky investments – high profits, there are many more disadvantages. Between them:
- High risk: according to statistics, only 25% of risky projects return money to investors.
- Long wait: Some projects take time to scale;
- Fraud: in some cases, companies build financial pyramids and investors lose everything they invested;
- High labor costs: It can take months to find a good project;
- High entry threshold: for participation in some projects, the minimum investment amount is several million.
How to make money from risky investments: ways
Invest in Blockchain and Cryptocurrencies
ICO is the initial offering of a certain amount of a new cryptocurrency before it appears on the market. They organize ICO to attract investment, the system itself resembles something between crowdfunding and stocks. So, for example, you buy new tokens with real money, which are used for development, and then you can resell them if the coin grows.
Another way is to invest in NFTs. This is the same as investing in art: for example, a painting by a little-known artist can go up a lot in price after a while. Here everything happens in the virtual world: you can become the sole owner of a video, photo and even a meme. There will be thousands of copies, but there will only be one original.
A more standard way is to invest in blockchain startups, there are already examples of high returns. Where mining hardware maker Bitmain was initially worth US$ 422 million, it has grown in value to US$ 12 billion in three years. Cryptocurrency exchange Coinbase was worth US$ 300 million and has become nearly US$ 2 billion.
Get in touch with a venture capital fund
The first funds of this type appeared about 50 years ago in the United States. Now, in the last 10 years, their number and volumes have grown significantly. A venture fund is an organization that invests investors' money in a large number of promising start-ups. The degree of risk is high, although resources are distributed among different companies and professionals are engaged in their pursuit.
Each fund collects its portfolio: they can be companies in specific areas of activity or at a certain stage, in a certain country. They often look for projects that offer new solutions that are likely to be in demand.
5 best investment funds:
- Runa Capital: Attracted investments for Nginx and LinguaLeo, its share in the projects is up to 40%.
- Admitad Invest: works mainly with Internet startups.
- Kite Ventures: invests mainly in online services;
- ru-Net Ventures: on average, its participation in projects is up to 35%, invested in Yandex and Ozon;
- IMI.VC: invests in games and applications, the fund's share is 40% on average.
Invest in startup stocks on your own
Startups have a hard time finding support from traditional lenders, so they are looking for additional ways to get development finance. When investing in startup stocks, you need to take into account that you will have to wait 5-10 years to make a profit, especially if you invest at the beginning of a project. So the entry limit is minimal as the risk is almost 90%. Later, the risks will decrease and the entry limit will increase.
If you choose this type of investment, try:
- Distribute a small amount of money across a large number of campaigns. So, one of them can grow so much in price that it covers losses and brings you a plus.
- Invest only the amount you don't mind losing.
- Distribute money among startups from different niches and countries.
Conclusion
People invest in different projects: some of them fail, but some of them become famous all over the world. For example, WhatsApp initially invested US$ 250,000 and now the company's profit has exceeded US$ 16 billion. By investing in innovation, you can reap great returns.
At the same time, it is worth remembering risky investment risks. They can be reduced: do not invest at the initial stage, try to look to the future and wait not only for this option. Don't forget to also consider safer ways to receive money.