The world owes a lot to technology startups. Over the past 30 years, society has gone from answering machines to voicemail, landlines to smartphones, typewriters to tablets, and analog television to high-definition digital streaming.
None of this would have happened unless someone invested in a tech startup company. That said, technology startups aren’t all perfect and don’t have a 100 percent success rate; some risks balance out the benefits. Still, it’s something to consider.
The Story of Ari Stiegler
Ari Stiegler believed in technology startups so much he created a platform that gives loans based on shareholder equity. Prism offers liquidity for tech startup founders, investors, and employees with no personal liability.
The idea is based on the fact that trillions of dollars are invested in private technology companies in the United States. The problem is that the companies aren’t valued, so they can’t take out loans to continue the financing. Neither are the investors getting money. The value of a company is determined when it is either bought out or goes public with its stock.
That ties up a lot of money for everyone and can put a crimp on startup financing. Prism offers a solution where shareholders can access cash through a loan secured by their shares in the startup. The business model allows them to keep their shares and defer their taxes, too. It’s a way to keep people from having to sell their startup shares when they need cash, which keeps tech startups stable and growing.
Prism isn’t the sole thing Stiegler is involved in. He is also a managing partner of Flux Capital, a Los Angeles-based venture capital firm. Steigler has moved more than $200 million in transactions in his career. The money covered real estate, direct investments, and venture capital.
Three Benefits of Investing in Tech Startups
Investing in a tech startup has three clear benefits and most revolve around the passion of the founder or tech guru who has the original idea. Look at that person to see if the tech company is worth it. Here are some other benefits from the mind of Ari Stiegler.
Tech startups can produce huge revenue returns. The right idea at the perfect time can net some gigantic returns. It can make those who start on the ground floor incredibly rich. Successful tech startups tend to grow quickly and are usually undervalued and unknown, so they are easy to get into without a lot of money.
Tech startups can create new investing opportunities. New tech challenges how things are done and often disrupts the current system. That leads to offshoot services and companies coming about, and that provides more investment opportunities. Those who are aware of the types of other companies that may emerge from the new tech can get in early on those investments.
Tech startups can change the world. It’s not often that someone gets a chance to be part of something that drives trends and pushes the world in a new direction. Tech has so many applications, from education to health care, that investors can pick a specialty they understand and can promote. There is something for everyone.
Tech startups can change how the world does things, like going from traditional X-rays to digital. Those that invest in them will at worst always have a story to tell, and might even gain the satisfaction of helping to save lives or prevent a tragedy. Those who invest in startups can feel the same sense of accomplishment and forethought as investing in large, established firms such as AT&T, Coca-Cola, and Walmart.
Risks of Investing in Tech Startups
Like anything in life, investing is a risk, and tech startups offer more risk than most because they are different and disruptive. It’s never certain whether something will be the next big idea, but there are three other risks besides that obvious one.
Tech may be cool, but unclear. Tech can be really cool when it comes to what it can do and how it can change things. Yet, the company can falter if people don’t understand what it is or how to apply it to their everyday lives.
The metaverse is one example. It’s a provocative idea, but it has taken a while for others to figure out what to do with it. Its stock tumbled 20 percent in October 2022 in part due to a drop in meta advertising and partly because the concept was unproven.
Tech companies may need even more money or time. It’s hard to quantify how much money is needed to put a tech concept on the market. It may take more time than originally thought and a consistent problem with tech startups is that they need a lot more money than originally planned.
Tech companies are competitive. Just because one person has a great idea doesn’t mean others don’t. There could be several working on the same general idea, so it becomes a race to see who will get to market first. Those who aren’t the first need to be the best.
Is It a Good Idea to Invest?
The decision of whether or not to invest in a tech startup is a personal one. From a practical perspective, potential investors should look at the talent of the team, the passion of the founder, and their plan for taking the concept to market.
Those who feel that the team and the founder are sufficiently determined and talented to fulfill the dream should consider investing. However, they should also consider how to use their shares to create liquidity, such as Prism offers.