You have to consider which of these startups actually has an exit

perryjordan

New member
Investing in the right startup can obviously be a profitable endeavor. Venture capitalists have been making billions doing it for years. I get nervous when I see how much money people have invested into some of these though.

The thing I think people don't realize is that there needs to be some sort of future event that results in investors getting paid out, and paid out enough to justify the risk they took making the investment.

Most of these investments are for common shares so investors aren't entitled to any future dividends no matter how well the company does. In order to realize a return on investment, the company either needs to go public so the investors can sell their shares or get acquired at a higher valuation than they invested so they can get cashed out.

So, before investing in a startup on a Reg CF or Reg A crowdfunding platform you have to ask yourself if the company you're about to invest in is one that's likely to get acquired by a much larger company that's willing to pay more than the valuation you invested at, or if it's the type of company (with the type of management) that is likely to go public one day?

Do your research and see what kind of valuation other companies in that industry have been acquired at and what valuation stocks are trading at. The idea here is to invest at a discount in exchange for taking the risk. Not paying a premium valuation for shares you might get stuck with forever.
 

annstalnaker

New member
That makes sense. I've looked at those a few times and never really understood how I was going to get my money back if I invested. I just hear myself talking trash to them in my Mr. Wonderful voice in my head.. 😆
 
Top