Invested in a failed startup? What does it feel like?
No matter what an average investor thinks, the reality is that no one can predict what company will become successful. Companies pivot, markets shift, founders split up. In short: stuff happens.
- Uber started with an Angel List round at $5 million and now is the hottest company in the planet.
- Color started hot and vanished regardless of a monster round.
- AirBnB sold cornflakes and air mattresses before nailing down the model that made it worth more of the Hyatt without owning a single room or hotel.
Consider these three Companies: Uber, AirBnB, Color.
Investors – The real victims of a failed Startup
The investor suffers brunt of the fall when a startup fails. Not only they risk losing all their of their investment, they lose an opportunity to grow and reap ROI on their valuable investments. For example, angel investors provide a one-time investment to help the business propel or an ongoing injection of money to support and carry your startup through the initial stages. Angel investors typically use their own money, unlike venture capitalists that manage the pool of funds from many other investors and place them in a strategically managed fund.
Usually, investors bind expectations of growth and profitability on the basis of a product. This approach, might at times be lethal. Without analyzing a product/market fit, if the investor makes a decision, stakes are that the investment might go in vain.
Subsequent Thoughts after a failed Investment
Usually big investors have their money pumped into multiple projects. If one fails, they have a backup - the other project which is turning tables and doing wonders in the market covers for the entire loss, and this proves that investment is nothing but ethical gambling, where you gamble money to earn manifolds for the risk you take.
Simply out, there is always a risk factor associated with each statement. If you fail, that is not the time to rest or stop.
Trust is a precious commodity
Investors tend to make informed decisions. They check the project feasibility, try to intercept the product/market fit, and most of all, deduce the founder’s mindset before making the investment decision. Yet, the investors might intercept the last one wrong, and at a later stage, it might compound into a loss. Conclusively, investors fail to trust new teams or ventures, and are skeptical about making an investment move, for the rest of their lives.
This might cloud their judgment as an investor.
Loss of faith
Many investors do not blame the team behind a startup, to whom the money was entrusted. One, they get superstitious about their chances to penetrate into a particular market or sector. Second, they make themselves believe that they need to focus on comparatively less treacherous and relatively safer sectors for secure returns.
How should investors feel about a failed investment?
According to multiple reports, an investor must consider that if they invested in 40 startups, 20 of them are expected to fail. If you cannot take the loss of at least one investment, startup investing is not your cup of tea.
For long, it has been said, that failure is the stepping stone to success. The statement might be debatable, but for certain, if your investment fails, you learn something out of it. Soon after, it is not the time to take a break - you can wait, take a step back and start again. Rest will go easy.The way out:
Imagine a solution where you had access to a refined list of innovative ideas. For example, each idea that came up to you was already cross-checked, has mentor support and services on the platform itself, so that you can watch your investment grow.
iPRONTO, a blockchain-based startup incubation platform, enables you to invest on startups that can change the world, with minimal risk. The transactions on the platform are powered by smart contracts, and each idea has an added level of verifiability to it, which implies, that you can make more informed decisions and judge the growth prospects of the idea before making the investment decision.
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