Innovation has become the buzz word around the world for good reason, as it offers one of the main ways to power an economy and employment.
Intelligent, successful, wealthy individuals, especially in the US, have been enamored and investing in startups for many years because of the following eight key reasons:
1. High average returns – A study by Professor Robert Wiltbank who “compiled the largest data set on angel investor financial returns that exists”, found that overall angel investors returned 2.5 times their original investment over a period of about four years. That equates to an annualized 25% return.
2. Potential for outsized returns – Startups offer the potential for incredible home run returns (commonly referred to as a black swan event). Almost no other investment class offers such incredible upside potential. For example, Amazon’s founder, Jeff Bezos, invested $250k in Google and netted $1.6bn. Peter Thiel, cofounder of Paypal, invested $500K in Facebook in exchange for 10.2%, and netted $1.6B.
3. Improved portfolio performance via diversification – Startup investments have a low correlation with other asset classes like stocks and bonds. A SharesPost whitepaper concluded that allocating just 5% to an alternative asset class such as private growth companies to a traditional portfolio, like 60% equity/40% bonds, could improve gross returns by 12%.
The problem for investors is that there’s been no easy way to invest in high quality startups.
4. Tax breaks – Australia now offers attractive tax incentives for supporting startups, such 10 years of tax free returns for investors.
5. Legal insider information – In the world of startups, unlike public markets, it is completely legal to research and be told about “price sensitive” information that almost no one else knows to stack the odds in your favour.
6. Affect life changing solutions – Startups represent innovation and many of those can be life changing for us all.
7. Job creation – Over the last twenty-five years, almost all of the private sector jobs have been created by businesses less than five years old.
8. Be involved – Unlike a publically listed company you can work closely with a startup to have a real impact on its success.
The problem for investors is that there’s been no easy way to invest in high quality startups. It’s been mysterious, complicated and investors have not known who to trust or where to go. CapitalPitch is changing all that.
Investing directly has meant crisscrossing the country in search of investment opportunities and getting bogged down in due diligence (or worse, skipping it!). Angel groups have not really taken off in popularity for many reasons. VCs have not been transparent or let you get involved. Crowdfunding platforms were hailed as the solution, but they don’t get the best startups.
CapitalPitch was designed as the solution by aiding investors in finding and investing in risk minimized high potential startups. They have connected, through technology, three main components for the first time with the aim to provide a simple, effective place for investors to invest in the very best startups:
1. Vetting – A thorough, systemized and efficient curation and due diligence process to source and vet amazing startups
2. Lead Investment Fund – A tax free investment fund to lead the investment in the startups for portfolio investors
3. Equity funding platform – to effectively showcase the startups after vetting, due diligence and with lead investors, to follow on investors
CapitalPitch is rapidly becoming the trusted destination for thousands of startups and sophisticated investors alike. They have created a start to finish solution that eventually might allow early stage investing to become a fully fledged asset class for the first time.