Q What is investing in startups about?
Investing in startups is about picking new businesses that you think have the potential to grow. You invest money in them in exchange for a portion of their equity, meaning that you buy shares in their business. If a business you've invested in succeeds, the shares that you own will become worth more than you paid for them. However, if the business fails - as the majority of startups do - you'll lose your investment
Q Can investing in start-ups be profitable?
Start-ups could be very risky to invest in but if they work they can be really profitable. Some startups have even brought a business into existence which people couldnt think about
QWhy might I need capital for my startup?
Many entrepreneurs need just a little bit of money to turn their idea into the beginnings of an actual business that can reach out to customers and later-stage investors. Depending on the business, this money - known as seed capital - might allow you to build a minimum viable product if you're a technology startup, buy equipment if you're a manufacturing startup, lease space and acquire inventory if you're a retailing startup, and so forth. Every startup is different, but as the costs of starting a business have come down drastically due to the Internet and other technological innovations, an increasing number of entrepreneurs find that a little bit of seed capital - often £150,000 or less - can get them a long way.
QWill my startup issue the shares directly to the investors?
No. You will issue the shares to us as nominee of the investors. This is a common way of holding shares on behalf of large numbers of investors, and it means that we are the sole legal shareholder for you to deal with on administrative matters, such as casting votes and issuing consents.
QWhat type of equity will my startup need to issue?
The startup will be asked to issue ordinary shares. These are the same type of shares that you, your co-founders and other early investors will usually have.
QWill investing in startups continue to be as profitable in the future?
No one can say for sure, but we predict that it will become even more profitable, especially relative to other asset classes. In a world where the creation of value is increasingly driven by innovation and adaptability rather than scale, businesses that are small and agile are well-positioned to outperform their bigger, slower counterparts. There will continue to be many failures of course, but we think that there will be more, and larger, successes, meaning that increasingly outsized returns will be available to investors in startups.
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