According to a definition by Silicon Valley entrepreneur, Steve Blank, a startup company is an entrepreneurial venture or a new business designed to search for a repeatable and scalable business model.
This being said, nowadays when saying “startup” different people might mean completely different things.
For example, some are still calling the ridesharing platform Uber a startup. Uber was created in 2009 and is now valued at more than 60 billion dollars. At this valuation, Uber is worth more than some car manufacturers, such as General Motors, Ford, or Honda.
Others are using the word “startup” when talking about a new business, even though this new business might be following a proven business model.
In any case, here are two reasons to invest in startup companies:
1. Returns and upside potential.
Early investors can get absolutely huge returns when investing in new companies. One such investor is world famous Silicon Valley entrepreneur, Chris Sacca. Chris has found a lot of hot startups in Silicon Valley and invested in them early. Sacca invested $300,000 in Uber and now owns 4% of the company. Currently this investment is worth around $2.4 billion. The value of Sacca’s first Twitter fund, Lowercase Industry, has soared about 1,500% since inception. All together his various Twitter deals have returned around $5 billion to investors.
2. Being able to help a company grow quickly.
Kevin O'Leary is a Canadian businessman, investor, writer, and television personality. He is one of the sharks on the popular TV show Shark Tank. Kevin’s net worth is currently estimated at $400 million.
Kevin loves investing in businesses in the wedding industry. After making a deal with a new business, he can simply go to one of his old businesses and promote the new business to his existing customers. This allows him to make a lot of money almost instantly without spending much money on marketing and advertising for a new business.