Choosing where to invest your hard-earned cash is a decision that needs precision and care. There’s so much to consider, just like with other investments, so it’s something you can’t do lightly.
People are first attracted by the potential ROI available in any investment and may begin to consider startups with enough earning potential to increase their portfolio.
Others might look within their network to see whether anybody is launching a business with exciting projections. You might have positioned some startups on your radar that appear to tick all your boxes at first glance.
Nevertheless, while the thought of receiving high returns might prompt you into signing away huge sums of money, consider thorough, in-depth research to ensure they’re the right startup investment opportunities for you.
The following are the top three startup investment opportunities to add to your portfolio as an investor.
1. Storage Facilities
Storage facilities need more capital but less manual work. Depending on your location or where you wish to invest, a storage facility can be a five-figure deal or a multi-million dollar investment.
For instance, real estate is more expensive in Manhattan, New York, than in Manhattan, Kansas. However, storage facilities require little training or labor. You only need someone to handle property care and basic customer service, rent out units, and handle tenant issues, such as evictions.
Mostly, people’s items stay in your facility, and they pay you for using your space. Consider working with a professional commercial real estate agent on this venture. You can also search for self-storage properties for sale online.
Suppose you don’t want to invest directly, consider buying into a real estate investment trust (REIT) at a lower cost. A REIT is like a real estate-focused mutual fund or stock.
Ensure you take time to research about storage unit investment opportunities before diving into that part of commercial real estate.
2. FinTech
Global finance leaders regard fintech as the digital force bringing unprecedented changes to the industry. According to Goldman Sachs, the estimated worldwide fintech is worth $4.7 trillion, and with over 12,000 startups scattered all over the globe, the number keeps increasing.
Fintech companies’ increasing momentum is due to their tech-savvy, younger, and affluent customers. From research by Capgemini, 46 percent of customers are using services from more than three fintech providers, while 60 percent of financial institutions now see such firms as their potential partners.
Be assured that any investment in fintech will yield maximum profit.
3. Real Estate and Property Management
You don’t require any particular degree to enter the real estate industry. What you need is to get a license in real estate and start earning. Additionally, you may have to get a broker’s license to operate your office.
Once you’re established as a real estate agent, you’ll need a computer and time to market properties. Realtors focus on building relationships, finding new clients, and marketing properties for quick sales.
Real estate commissions are generally six percent of the sale price, split between the seller’s and buyer’s agents.
You can establish a real estate agency and hire realtors who will work under the company while monitoring their activities.
Tips for Investing in Startups
You surely want safe investments with high returns, so apply the following tips when considering investing in startups.
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Don’t Rush
One golden rule about investing in startups is never to accept things as they appear on the surface. You’ve got to do your research and discover if the company has a detailed growth plan. It’d be wise to only commit to ventures that have passed through adequate testing.
Maybe, you’ll need to assess the business from an entrepreneur’s perspective. Such a perspective is valuable for investors with only large corporate background with little knowledge about growing a startup.
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The Business Model
You’d need to examine the business model thoroughly. In weighing the startup investment opportunities, you must understand the expected returns and overall risks involved. Thoroughly examining the business model helps you to achieve this result.
You’ve got to check related considerations, such as the capital structure and the exit potential. That way, you understand the appropriate return and investment risks.
The business model and a detailed business plan execution report should be compelling and realistic to the investor.
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Money Matters
Crucial questions to ask regarding the startup element will include capital requirements. Will there be adequate funds for the realization of company goals? What about cash flow?
Does the enterprise have a detailed plan of how it intends to use your investment fund to drive growth? Even thriving firms can go bankrupt when cash flow isn’t adequately maintained or managed.
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Market Forces
The potential investor should thoroughly examine the startup’s target market. Another thing to focus on is a detailed plan for market penetration.
According to a report from CB Insights, a data analytic firm, 42 percent of startups fail due to no market need, meaning they aren’t addressing any specific problem that would have moved people into patronizing them.
Suppose you decide to analyze startup investment opportunities, there are various market sizing methods to use. You can take a top-down view, which involves calculating the total market size and working down towards the startup’s potential market share estimate.
Also, you can use the bottom-up analysis, which is accurate but labor-intensive.
Bottom-up analysis entails calculating the places where you can sell the product, drawing up a detailed picture of the startup’s likely reception in the market, and considering the sale of similar products.
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Diversity Is Key
Experienced investors considering investing in startups should add more than ten enterprises to their portfolio.
Also, ensure the portfolio is diverse enough. A good startup portfolio should include businesses at different development stages, in various industries, and where you can easily access other entrepreneurs.
Final Thoughts
Startup investing has many risks as an asset class. However, in the long run, it becomes rewarding, especially if you choose the best company.
Picking the right startup investment opportunities needs lots of analysis and research. You’ll need to take external professional advice from a commercial real estate agent to help you through this process. In the end, the entire decision rests on your shoulder.
Therefore, ensure you’re making the right startup investment for your portfolio expansion. One investment you must include is self-storage if you want to earn passive income.
