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Welcome! Investing in startups can be rewarding, but is also considered risky. It is important to be educated on startup investing before participating. We have created this education center as one resource to help you on your way.
Individuals who invest in startups are called angel investors (Angel Investing), whereas institutions that invest in startups are called Venture Capital firms. Conventionally, only large institutional investors such as endowment funds, large family offices, fund of funds, and pension funds have been able to gain exposure to the returns of startups funded by venture capital firms. FundersClub lowers the barrier to diversify one's portfolio to include the types of investments traditionally targeted by top VC firms, and uniquely is open to both individual and institutional investors.
An investor that invests in a startup is buying a portion of the startup, with the intent to share in the possible upside were that startup to later become successful. Financial returns are realized by the investor when a liquidity event occurs, such as a secondary sale of stock, an acquisition, or an IPO. These events can take a long time (e.g. 4-7 years), and may not occur at all if the company is not successful, often resulting in a write-off of the entire investment.
As implied above, the venture investment asset category is generally known to be high risk, high reward. As a result, Diversification is a strategy employed by most professional startup investors to help balance wins and losses. In addition, although many endowment, pension, and other funds have venture capital holdings, they typically limit exposure to venture to 5-15% of their entire portfolio.
Experienced angel investors use FundersClub for a number of reasons: