💸What is startup investing?

Simply put, a start-up is a young company that seeks high and quick growth . Startups often have high growth rates, which cause the value of the company to increase rapidly when compared to existing companies in mature industries with slower growth. They also generally validate a scalable business model.

Over time, its customer base begins to grow, and the business begins to expand its operations and its aims. Before long, the company has risen through the ranks of its competitors to become highly valued, opening the possibilities for future expansion to include new offices, employees and even an initial public offering (IPO).

The J-Curve

A young startup needs to be able to crawl out of it before they run out of cash. Here is a description of the different phases of the Startup J Curve:

1. Create: This is where the initial excitement occurs for a startup and the three elements come together: the idea, team, and the money. This is the best time to raise money because the startup is selling the dream.

2. Release: This is where a startup releases their product to market and where the market will provide feedback. It’s where the rubber hits the road and reality hits. It’s at this phase where founders really need to listen to their customers.

3. Morph: In this phase, the startup needs to make adjustments on their product or business model based on customer feedback. At this phase, there needs to be several iterations until product market fit is achieved.

4. Model: In this phase, the startup needs to optimize their business model. The goal is to get to a point where there is a direct ROI if more money is invested in the startup.

5. Scale: After the business model has been nailed, this is where investment into the startup is able to scale the business.

6. Harvest: This is where the startup graduates to a fully established business and is where the founders have the opportunity to reap the benefits of their labor. It is also where they need to decide on what direction they would like to take including IPO, acquisition, etc.