>
A startup is essentially the launch of a new project, usually created by young companies aiming to present their innovative ideas to the market. But, as is known, any project requires capital investments, and for this, investors are attracted. They can be said to be risk-takers. They must believe in the new project and risk their own capital.
In other words, investments in startups are called venture investments at the initial stage of their development. The main goal of venture investments is to provide financial support to young unknown companies, which may bring them success and profit in the future.
The main danger in this business is that you have to believe in a new project, with unknown results, and sometimes even the product itself presented on the market.
Investments in Startups
Investment in startups is a very risky business, so it is necessary to understand the specifics of such investments:
- High risk. Investing in startups is a risk that cannot be calculated or analyzed in advance because the main driver of a startup is ideas;
- Long-term investments. Every idea requires time for implementation and realization;
- Diversification. Investors engaged in investing capital in startups do not stop at one project, which allows them to more likely find a successful project;
Analytical analysis and research. Since projects carry high risk and uncertainty, venture investors conduct analysis and research of the product and its creators, preferably at an early stage.
Direct investments are also possible, which allow becoming part of the project and owning a share of it. This allows the investor to directly participate in the launch process, and such investments can be both individual and group. Collective investments serve to pool the capital of several investors to finance one or more projects.
Indirect investments are also possible, which are made by purchasing a certain share in the startup using stocks or venture funds. This method is the most accessible for investors with different incomes and allows quickly becoming a co-owner of a new project.
Fraudulent Startups
Dreaming of income and profit, investors engaged in investing in startups and risking their capital may also encounter scammers who dream of getting rich at the expense of naive investors by providing them with fake startups.
Scammers manage to involve investors in fraudulent schemes:
- having good psychological training;
- possessing knowledge of social engineering;
- using persuasion skills.
Fake startups are created only to collect money from investors, promising them golden mountains in the future, while in reality, the project is fictional and not intended for development. After collecting the money, the scammers disappear.
A group of scammers may work together, creating attractive presentations, talking about innovative ideas of the project, and the amount of investment needed for the launch. In general, they do everything to attract the attention of investors. For this, advertising and special platforms are used, allowing them to meet with potential capital investors.
Sometimes scammers operate on a small scale, attracting victims who will invest small amounts, but the number of investors who believe them will be large, allowing them to earn a decent amount by luring such investors. On the internet, they most often use social networks and advertising in messengers, promising that with a small investment, you will become a millionaire in the future.
Investment Fraud
Investment fraud is convincing the victim to invest money in cryptocurrency, stocks, unknown projects, and many other assets through deceit.
Each year, the number of such frauds grows, criminals enrich themselves, and investors lose significant amounts.
To recognize investment fraud, you need to protect yourself by learning to see the first signals and signs of investment fraud. They occur on various websites, appear in ads, or contact you by phone. There are several signs of investment fraud:
- the offer of investing money appears unusually attractive;
- the need to make a decision quickly, which is a form of pressure on a person;
- fakes about the limited offer, incredible discount, or for a specific group of people;
- sometimes a call or email comes from abroad from an unknown sender, if responded to, they mislead you, communicating in a foreign language.
Investment Risks
All the processes mentioned above are investment risks, every investor who invests money in an initial process is necessarily taking a risk. Whether it's venture investments or equity or stock investments - it's a risky business. It's unknown which startup will succeed and attract users' attention, which will provide an opportunity to multiply investments in the future.
The risk lies in the possibility of losing investments in the event of a startup collapse or a fraudulent scheme with investments in new topics.