The return on investing in a startup can be really hard to anticipate. I was reading an article on Tech Crunch titled “The One That Got Away” which highlighted how one investor had the opportunity to invest in Pinterest but passed.
Let’s get real about investing in startups first before we talk about what happens when you invest in the home-run. You could invest $25K and you could even be helping that company out further by opening connections to customers, other investors, helping the person find a co-founder, developer, helping them find employees all of which are invaluable to that company. The truth is you might not see a single dollar back from investing in a startup.
However, if you get crazy lucky and invest in a company like Pinterest you could have seen something like this: A basic $25k investment in Pinterest at $5 million valuation would mean $7.5 million in value at its current $1.5 billion valuation, a $50k investment would be now worth about $15 million.
One of the most interesting things about Pinterest is that it’s been stated on New Media and Marketing: Some believe that Pinterest users live and influence almost everyone within the ultimate social graph and that from a marketing standpoint Pinterest users find and share a lot of great information. Pretty impressive for a startup to have it’s valuation increase to over a billion in a few short years with only 13 employees.
What are some of your expectations when you invest in a startup? Do you like to get involved with the strategic direction? What’s your primary reasons that you invest in startups?