The world of startup investing is expectedly different from investing in the public market, and there is one question I get regularly from new angel investors who want to diversify their portfolio. While most startups won’t achieve Facebook or Dropbox returns (62,000% and 39,000% ROI, respectively), a long-term investment of 5-8 years in the right startup could produce higher returns than any other asset. Arguably, one of the most attractive components about buying equity in early-stage startups is the uncorrelated attribute it provides, which is what financial advisors often emphasize- the importance of diversification and uncorrelated returns in a well-balanced portfolio.
With emerging equity crowdfunding platforms that make it easy for curious investors to review available startup deals, there is an interesting learning curve that needs to be addressed among new startup investors, which is my main motivation for writing this piece. Daily, new investors joining RockThePost most commonly ask one question: What ROI can I expect from my investments? This is a rational question, but not one that can be answered simply for a number of reasons. Rather, it’s best to be well-versed on the implications of angel investing in order to formulate an educated set of expectations. With that in mind, here are 3 key points I emphasize when investors ask about the expected ROI of startup investments.
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Via Marc Kneepkens