Investing in Startups
Investing in startups can be very profitable and it can be sink hole into which you throw your money. How do you find startups? How do you get into startups? What are the barriers and what do you need to know for this kind of stock investing? How do you best avoid losing money while investing in startups and looking for the next Microsoft or Genentech? Getting into startups on the ground floor has more to do with connections and money than it has to do technical analysis or even, to a degree, fundamental analysis of the company’s prospects. Technical analysis tools such as Candlestick chart analysis are useful when the stock becomes public. Until the stock trades, traders have no formal market to trade in. Investing in startups is typically only open to so called qualified investors. This is a person with a net worth of a million dollars and at least $200,000 annual income or $300,000 if investing jointly with a spouse.
Investing in startups before they go public is the best way to make the best profit on a given company. When the company is just an idea it needs money and when the company has developed products it increases in value. When the stock goes public the stock price reflects the fact that the company has a good chance of succeeding. Investing in startups often means investing in companies that never make it to sell stock. The biggest majority of startups never make it. Thus venture capital firms expect to win very big on the occasional company while losing money on lots of others. For long term investing the idea of picking stocks in startups may sound attractive but should be coupled with a number of things for investment risk management. The first is that the investor needs to understand what the company is going to do and what the market may be. The investor needs to understand that investing in startups is like penny stock investing. There is the potential for a lot of profit and the potential to lose all of your money. The difference in investing in penny stocks versus startups is that a company being traded can be looked at with both fundamental and technical analysis with an eye towards the price to earnings ratio and Candlestick pattern formations in order to anticipate price changes. If you are interested in investing in startups one option is to call a stock broker and find out what startups are available and who is offering entry into the investment pool.