Invest in ‘startups’ without falling for it

“If you are willing to take high risk then investing in startups has the potential to yield high returns. Emerging companies are innovative companies looking to solve problems or meet needs, and therefore have high potential,” say experts. Santander Bank, The Spanish startup ecosystem as a whole continues to grow and is estimated to already represent a value of 93,000 million euros.

Who can invest in them? What are its advantages? How is it different from other forms of investment? How to select the best opportunities? through the portal Santander promotes the companyA place to stay up to date with information on the most relevant topics and keys to business, the unit explains everything there is to know before deciding to invest money to finance a startup’s growth.

“Anyone with a minimum financial capacity can invest in them, although some types of investments (such as certain financing rounds) require a minimum amount or a maximum number of investors. Each financing model is unique”, they confirm with the bank. We do. From close family or friends (sometimes without much financial knowledge) someone who helps or is known to start up business angels, experienced investors who invest their personal money and sometimes their knowledge and network of contacts; to the system of crowdfunding Straightthanks to the summation of the contributions of various investors to the crowdfunding platform; venture capital funds, which invest funds of third parties, including individuals, and which often issue packages with shares of several companies in the development stage in order to diversify risks; Or seed capital fundThose who enter the stage earlier and therefore, with greater associated risk.

High Return – High Risk

One of the advantages of investing in startups is high return potentialwithout missing out on the opportunity and satisfaction of Participate in innovative projects, some of particular relevance to the future, Conversely, the biggest disadvantage is the level of risk associated with the investment. Unlike other markets like stocks, fixed income and even real estate, investing in startups is cashlessThat is, recovering capital is not easy and sometimes there is no way to do so. Also, the price is not very stable and may suffer high volatility, Existence high contrast, which means there is a small chance to win big and a big chance to lose it all; and one is indefinite investment periodAlthough it will most likely be longer.

“A’s profitability start up It depends on a large number of factors, which makes the analysis of investment markets in emerging companies exceptionally complex”, say Santander experts.

where to start

is the first step Define investment profile: Maximum amount, risk to take and sector. In this way, according to the entity, “it is possible to cancel a good portion of the options.” Following the news of the markets and being aware also helps to forget some areas and be aware of the risk. “For that level of risk aversion it is convenient to analyze the economy itself.”

Once this screening is done, and some companies have already been selected according to our profiles, other factors must be taken into account before a final decision is made. For example, Commitment, experience and knowledge of the founding teamwhich would allow us to know whether “they are sufficient to be resilient to the abandonment of a member”; Learn about the product or service that they’re going to launch and consider whether it makes sense, if the timing is right, if it solves a problem… it’s also convenient Analyze target market, if it exists or is to be created, what is the competition or if there are already similar products or services that can be substitutes. “Of course, these are not the only questions to ask, but again, they help to flesh out the options.”

finally comes Most difficult moment: search startup of success, While there are no guarantees, we can find some clues that help us trust a business model. Having won an award, if they have participated in an accelerator (they select candidates with very demanding metrics) or if they have a business angel behind them (i.e., an expert and experienced investor) can be good indicators.