Since the launch of equity crowdfunding, we’ve put the majority of our focus towards startups looking to raise capital. But ever since the launch, investors have been the group with the most questions. The most frequently asked question we've heard from people looking to invest in startups is “What’s the return on my investment, and how will I get paid?”
Before we get into the different avenues of seeing potential returns:
- Do your research on the company, industry, and team
- Try to invest in businesses you use or have a thorough understanding of
- While not foolproof, try to manage risk by diversifying their portfolio
- Understand that there will never be a guaranteed return on any investment
Unlike the stock market, you don’t have the ability to sell your shares with the click of a button. In most cases, equity funding will be a long term investment. The best case scenario is that you can make a potentially healthy return on a startup you choose to invest in, while the worst case scenario is losing all your money on investments that don’t pan out.
Now that you have a better understanding of how things work, let’s look at the different ways a company could “exit” and possibly return capital to equity investors.