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Supporting new businesses:

Everyone knows the high failure rate of startups, but how do we help them succeed? When event three-quarters of new companies financed by venture capital flounder. Even faced with these odds, year on year ever growing numbers of people are willing to support such enterprises all over the world, through new platforms, seeking new forms of investment. This move is considerable and not merely transient; the net amount of venture capital finance for investment peaked in 2017 at almost £3 million, breaking the record of the preceding year by twofold. As a result of such data, one must seek to shed light on the situation;

Why you should put money into a new business:

Everyone likes the idea of making a fortune overnight we have heard stories in the news of Facebook Billionaire college kids, which was founded in 2004. In a relatively short space of time the company was reputedly worth more than $500 billion. As well as people searching for a USB stick containing millions in forgotten bitcoin. The fear of missing out is a powerful thing and this applies to investors looking for the next global enterprise when it was just getting off the ground. Indeed, successful wealthy people also enjoy the chance of adding to their current investment portfolios and potentially being in the vanguard of commercial advancement and modernisation. In reality, putting money into a new business is akin to playing the lottery – people do it because there is an outside chance of hitting the big time, but you have to play the odds.

Balancing your portfolio means being willing to lose money, not every investment can be a homerun, this is a simple reality though the risk will be rewarded, if appropriately spread, Fabrice Grinda explains that  “Most studies suggest that angels with fewer than 10 investments lose money, while those with more than 10 investments make money. Moreover, the more investments angels make, the higher their IRR as it increases their probability of a huge hit.”

Weighing up the pros and cons of putting money into a new business:

As with any commercial venture, there are potential hazards when contemplating investing in a new business, yet these can be offset by the tantalising thought of financial remuneration and general success. This goes some way to explaining the fact that some people sometimes are more than willing to invest at their own peril. As we have already seen, most do in fact fail; there are significant reasons for this backed up by research and analysis.

For example, Fortune found out that 23% of new ventures fail to succeed due to not having suitable team members, whilst 42% fall short due to ineffectual market research, and 29% of unsuccessful businesses simply stall due to not having enough financial backing in the first instance. Such statistics show that one must be insane to consider such an investment, yet there remain few better ways of gaining a huge monetary reward and being involved in something truly innovative.
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Sherrie Lacey

Writer, Business Women

Sherrie Fluer De Lacey is a doctoral student, currently studying a PhD in International Business at the University of Zurich, Switzerland. She previously worked in the City of London as an analyst, developing proprietary trading algorithms, helping to raise money and broker deals following this, she embarked on extensive research and with collaboration Sherrie has put together several books to share the findings of this academic research more widely.

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