Investing in Tech Startups

A tech startup is a company whose purpose is to bring technology products or services to market. These companies deliver new technology products or services or deliver existing technology products or services in new ways.

Ordinary people can invest in startups via crowdfunding sites. Startup investing platforms offer a curated selection of companies, and require varying minimum buy-ins. At Blue gates, we are tappeed into the startup market and easily determine startups that are worth investing in and grab the opportunity just as it hits the market.

When you invest in a startup our Company, you enter into an investment contract with the company. Broadly speaking, there are four different kinds of investment contracts, each of which offers different ways to make money from your investment:

  • Debt: This type of contract treats your money like a loan that earns interest. The contract may pay out a fixed return, such as two times your investment, or a variable return.
  • Convertible note: Instead of earning interest, this contract is a form of debt that converts into shares of stock when a startup archives certain goals—like gaining new rounds of funding. You make money on your investment once the company is purchased by another firm or eventually goes public.
  • Stock: Later-stage startups may let you buy shares of stock in the company, much like you would buy shares of a publicly traded company.
  • Dividends: Successful later-stage startups offer investors the ability to buy shares of stock that pay annual dividends.

Why Invest in Startups

Investing in startups gives you a ringside seat to solutions for challenging problems or the development of new technologies.

Large-cap stocks in the S&P 500 are far less risky than startups, but there’s seldom room for exponential growth. If you pick a successful startup, however, the sky’s the limit. “There’s so much opportunity for expansion,” says Tom Schryver, who teaches entrepreneurship at the SC Johnson College of Business at Cornell. “There’s an enormous multiplier effect that could be huge. That’s part of what an investor would be buying.”

Startup investing may appeal to you because it’s about entrepreneurs pursuing a new idea. “People often invest in what they want to see in the world, whether it’s more sustainability or a really cool sneaker company,” says Elias Stahl, founder of environmentally friendly shoe company HILOS. “There’s no better opportunity to see something that you want in the world and to support that.”

Maybe your brother is launching a great new product, or perhaps it’s your neighbor. It seems like an innovative idea, and you want to help finance the project of a friend or relation. “A lot of people invest in startups because they’re in a network and being supportive of a project they know,” Schryver says. A lot of startups that have been funded by family has turned ou as a good investment.

For some investors, startup investing is something they do for the feeling it gives them—helping someone found a business, watching something new get created, learning about different industries or getting in on the ground floor of something exciting.