These days, it’s almost difficult to work without utilizing any type of technology. The entire business has affected the economic landscape in manners no other industry has done previously and perceiving how quick it changes and advances, safe to assume that the industry’s growth is basically unstoppable. Putting resources into new companies was generally saved for those with solid funding or angel investment connections. Thus, less than 1 % of the U.S. as of now puts resources into new businesses. But with the development of value crowdfunding platforms, financial specialists are currently ready to gain admittance to a wide grouping of beginning period venture openings. Given this is an extremely new resource class for most financial specialists, I am going to stroll through motivations to consider allocating capital to angel investments in Arigohub startup.
The abundance of promising returns and potential
Uber, Airbnb, Facebook, even Microsoft – these are just a few of the biggest household tech names in the 21st century which started out from scratch. If not for the investors who believed in their potential, we wouldn’t be enjoying their services now. And for a USD1,000 initial investment? A USD 6 million return definitely isn’t bad.
Of course, not everyone is as lucky. Keep in mind that nothing is 100% sure when it comes to investing, at Arigohub they only offer startups with the biggest potential to return profit. But once you hit the jackpot, it goes without saying that taking the risk is definitely worth it. See also: Max.ng Sets to Introduce Electric Bikes After Raising $7 million Funding
You take part in funding the future
There’s no denying that tech startups are the hope of the future. Investors find fulfillment in helping these companies because most of these ventures are geared towards introducing innovative ideas that propel social change. Apart from being part of something revolutionary, funding high-potential tech startups also create more jobs which lead to a satisfied workforce and a healthier economy.
Overall Portfolio Diversification
Early-stage, private companies generally have a low correlation with traditional asset classes, such as stocks and bonds. Allocating 5% to private growth companies could increase the returns of a traditional portfolio by 12%. Most sophisticated pensions and endowments have also come to the conclusion that allocating a portion of their overall portfolio into the venture and private equity investments can reduce risk while increasing returns. For instance, Yale University’s endowment allocated 31.0% of its portfolio to venture capital and private equity in 2013 and has generated 29.9% annualized returns in private equity and venture capital since 1973. Furthermore, The Yale Endowment’s 2013 Annual Report defends its asset allocation model, noting that “traditional 60 percent equity/40 percent bond portfolios are not diversified, not equity-oriented, and not appropriate for long-term investors.” Along the same lines, a recent Deutsche Asset & Wealth Management report argues that adding alternative assets to a portfolio of stocks and bonds can reduce volatility and increase portfolio efficiency.
Returns and Upside Potential
The aggregate returns for the asset class as a whole are better than you might expect. In 2012, Thomson Reuters launched the Thomson Reuters Venture Capital Research Index which seeks to replicate the performance of the venture capital industry. The index shows that venture capital has returned 19.7% per year since 1996 versus just 7.5% and 5.9% respectively for public equities and bonds. Also in 2012, Professor Robert Wiltbank released findings from the largest data set on individual angel investments that have ever been collected and found that U.S. angel investors returned 2.6x their money on average. If we assume that the average time to exit an angel investment is five years, 2.6x equates to 21.1% annualized returns which is slightly higher than overall venture returns. Also, there are few asset classes that offer the homerun potential of venture investments. Peter Thiel’s initial investment in Facebook increased in value by over 2,300x prior to IPO. Although investors should absolutely not expect to find the next Facebook, Twitter, or Uber, it is hard to ignore the asset class potential to generate outsized returns. See also: Meet Craig Walker, who sold his first start-up to yahoo, second to Google, and the third worth $500 million.
Funding the Future
I know I mentioned this earlier but I cannot overemphasize this. Asset allocation and profit potential aside, angel investors are also often investing in startups for more intangible reasons. Unlike essentially any other type of investment, startup investing provides the opportunity to invest in innovation and to feel real ownership in the companies that you invest in. Every year, angel investments create thousands of revolutionary and life-changing technologies. In addition to providing capital, angel investors have the chance to become involved with the companies themselves. Investors often take on strategic advisory roles, provide advice, or offer industry connections, among other things. For former entrepreneurs and for those who never had the chance to start a company of their own, supporting a startup can prove to be the next best thing. First-time investors need to consider that backing startups can be extremely risky and is very different from investing in public stocks. Risks aside, there are strong reasons for investors to consider allocating a small percentage of their overall portfolio into alternative assets and startup investments in particular.
“…balancing your portfolio by funding a fair share of established businesses and budding tech companies is a strategic move towards decreasing volatility and increasing your opportunities for higher ROI.”