If you are considering investing in startups from New Zealand, then you probably should know the golden rules of investing successfully in an NZ startup. Let's dive in.
Beginners guide to investing in Startups from New Zealand. Startup Investing 101
Check out how startup investing works in New Zealand. How Startup Investing Works
Find out why you should start investing in Startups in New Zealand. Why Invest In Startups in 2022
Find out all you need to get started with investing in Startups in New Zealand. How To Start Investing In Startups
Find out the main risks associated with startup investment in New Zealand. Startup Investment Risks
Check out some of the rewards that go with investing in Startups in New Zealand. Pros of Startup Investment
Find out why New Zealand is the perfect place to start investing in Startups. NZ Startup Investment
Check out what the future holds for startup investments in New Zealand. Future of Startup Investment in NZ
Startup Investing 101
Startup investing is the process of committing capital to a new small business venture with the expectation of deriving a financial return.
Startups are high-risk, high-reward investments. Some become the next big thing — think Uber, Facebook, or Google. Others don’t take off and end up closing their doors.
Investing in startups can be a great way to earn huge returns on your money. That’s because it’s common for early investors (a group that includes employees) to receive equity in the company they’re building. If the company goes public or is acquired, it can be a home run for those investors.
Investing in startups is very similar to investing in companies. If you invest in a startup, there is a chance that it may fail, so it is important not to put all your eggs in one basket. Diversification is incredibly important and is an essential part of investing.
But while startup investing isn’t a guaranteed winner, it doesn’t have to be limited to Silicon Valley insiders anymore. Today, anyone with a little bit of cash can invest in startups and other private companies from New Zealand through equity crowdfunding platforms.
If you want to get started (but aren’t sure where to begin), here’s everything you need to know about investing in startups from New Zealand and how it works.
How does investing in startups work?
Traditionally, investing in startups has been a very exclusive club for wealthy investors and well-connected individuals. With equity crowdfunding platforms like Snowball Effect, ordinary everyday investors can access early-stage investment opportunities that were previously only available to an elite group of angel investors, venture capitalists, and private equity firms.
Investing in early-stage companies is high risk and should only be performed as part of a diversified portfolio. Investing small amounts in multiple companies can help spread risk across several asset classes, sectors, stages, and geographies.
Startups themselves benefit from being able to pitch their ideas to a network of investors. While small amounts from each investor may not seem significant at first, large numbers of everyday investors add up quickly and can be crucial for getting a business off the ground.
Why should you invest in a startup?
Startups are incredibly exciting companies because they are often at the forefront of innovation and have huge growth potential. While that growth isn’t guaranteed, it can mean that you can get your money back (plus interest) fairly quickly.
How much should you invest?
That depends on your appetite for risk! We always recommend that people diversify their investment portfolio across a range of different investments so that if one company fails, it doesn’t mean you lose all your money. We recommend that you set aside 10-20% of your risk capital for investing in early-stage companies (e.g., startups). While we can’t guarantee a profitable return on investment, we’ve seen returns between 10and 30%.
Is startup investing profitable?
The key question for all investors is how much profit they can make by investing in a given startup. This takes into account two factors: a company’s potential growth and its estimated risk — and New Zealand-based startups often score differently on both counts.
Startups that can grow quickly are obviously more attractive to investors than those that can’t because they have the potential to provide a bigger return on investment (ROI).
How To Get Started Investing InStartups
Before you make your first investment, it’s critical that you understand the risks involved and have a strategy in place. Here are some tips that can help you get started:
Know what type of investor you are :
Being an investor in a startup is similar to being an investor in the stock market: different types of investors have different goals and risk tolerances.
Do Your Research :
Doing your due diligence on these companies is important, but so is learning as much as you can about the industry they’re operating in. Is it something you have personal experience with? If so, that can provide you with some insight into the startup’s chances of success — or failure. If not, dig deep and try to learn as much as possible about what they’re trying to do and why they think they’ll succeed where others have failed.
Find startups with unique offerings :
With so many companies competing for the attention of investors, the ones that stand out are those with an original idea and plenty of potential upsides. This means, in part, finding companies that have a product or service that appeals to a niche market. The more specific the market is and the larger the target audience in that niche, the greater the chance of success.
Look for companies with strong leadership :
You don’t want to invest in a startup if there isn’t someone at the helm who has what it takes to see it through thick and thin. Look for people whose personality and values match up with your own, as well as those who bring a solid business background to the table. A good leader will have passion for the company and its product or service, as well as a keen sense of how things need to be done to ensure success.
Understand the tax implications :
When investing in startups, there are tax implications that you need to be aware of as a result of selling your shares at a later date. Shares in an unlisted startup are treated differently from shares in a listed company by the New Zealand Inland Revenue Department (IRD).
Ensure there is adequate financial backing :
Startups need money to succeed, which means they should have enough funding available to grow their business and develop products. If there’s not enough capital available from outside sources (such as you), then consider investing in another business instead.
What are the risks associated with investing in startups?
The risks associated with investing in startups are relatively high. However, it is important to remember that many of the world’s most successful companies were once just startups. For example, Google, Facebook, and Airbnb were all startups at one point.
New Zealand has some of the most progressive equity crowdfunding laws in the world, but there are still risks associated with investing in early-stage companies – this is why you should only invest money you can afford to lose.
Financial Loss : The biggest risk is financial loss. As an investor, you need to be prepared for this and make sure that any investment you make is small enough that, if it fails, it won’t cause you significant personal hardship.
Time Consuming : Another risk is that investing in startups can be time-consuming. For example, suppose you’re investing in a startup via a syndicate (i.e., alongside others into a single deal). In that case, you’ll need to review the deal, decide whether or not to invest, and then manage your investment over time. This might involve reviewing regular financial updates and voting on major decisions, such as whether the directors should take out a bank loan.
Bad Media Coverage : Finally, if there’s been media coverage of scams where companies have stolen people’s money, this can also raise concerns about the legitimacy of the industry more broadly. While these cases are rare, they do happen from time to time, as in every industry (including traditional finance). This highlights another key risk factor.
What are the benefits of investing in startups from New Zealand?
New Zealand has a stable and progressive government that supports technology innovation and entrepreneurship. NZ is making a huge effort to grow its tech sector, with a particular focus on agtech, fintech, blockchain, and IoT. In Auckland, Wellington and Christchurch, there are many programs designed to help startups grow and succeed.
Here are some benefits of Investing in Startups:
You can diversify your portfolio by investing in multiple startups at once:
One of the major benefits of investing in startups is that you can diversify your investment portfolio by spreading your investment across multiple startups. In this way, you’re not putting all your eggs in one basket, and you’re reducing the risk of your investment. This can be particularly useful for startup investors who are new to this type of investment and who want to manage their risk profile.
You’re taking on less risk than you would with a public company :
A large publicly traded company has years of history, hundreds (if not thousands) of employees, and millions of dollars in assets. A startup, on the other hand, has none of those things. That means if it fails, it won’t drag down your entire investment portfolio.
You can invest in companies you believe in and want to see succeed :
You probably wouldn’t be reading this guide if you didn’t think New Zealand startups were cool or that they had the potential for growth. While there are no guarantees when it comes to investing in any company, the payoff can be huge when it comes to startups because most of them go from zero to hero overnight.
Flexibility – Invest as little or as much as you want:
One of the greatest advantages of investing in startups is that it gives you the flexibility to invest any amount you want without having to deal with high minimum investments like with venture capitalists.
No hassle of being involved with day-to-day operations of a company :
One thing that may put some people off from investing in startups is the fact that they have to be involved with the company’s day-to-day operations, which is something they may not have time for. With equity crowdfunding, investors don’t need to worry about this because they will not be involved with the day-to-day operations of a company.
This is particularly useful if you’re an investor who wants to stay away from the daily grind of running a business but still wants to reap the rewards of being an investor.
What makes New Zealand so attractive to startups?
New Zealand has a strong economy and government support for businesses, making it easy for entrepreneurs to start their own companies. The country also offers different tax benefits and incentives to encourage people to invest in businesses.
The government provides funds and grants through various initiatives, such as NZTE (a government agency that helps businesses succeed internationally) and Callaghan Innovation (an innovation agency).
The Future of Startup Investing in New Zealand
Investing in startups from New Zealand has the potential to be a real gold mine.
New Zealand is poised to be one of the next big startup hubs, and there is a lot of buzz around investing in Kiwi companies. However, some investors are wary of putting their money into Kiwi startups because they are unsure whether the risks involved are worth it.
The first thing that comes to mind when you think about investing in Kiwi startups is probably: “But what if I fail?” While this may seem like a reasonable question to ask, it’s important not to let fear keep you from exploring all of your options. In fact, many successful entrepreneurs have started with little more than an idea and some determination!
So how can investors make sure they’re getting the best bang for their buck? By avoiding common pitfalls like overvaluing companies or focusing too much on hype instead of substance when evaluating potential investments.”