High-Risk Capital for Moonshot Opportunities
Startup investments mean angel investing or venture capital exposure in early-stage companies - seed to Series A typically. You're funding businesses pre-revenue or pre-profitability, betting on explosive growth potential. Successful outcomes can return 10-50x your investment, but 70-80% of startups fail completely.
This isn't stock market investing where you participate in established business cash flows - you're funding founders to build unproven business models in competitive markets. Due diligence requires understanding business models, market size, competitive moats, and founder capability, not just Excel projections showing hockey stick growth.
Illiquidity and Total Loss Are Default Assumptions
Your capital locks up for 5-7+ years minimum with zero liquidity - startups don't pay dividends, and there's no market to sell shares until acquisition or IPO. Most startups that don't fail outright become "zombies" - surviving but never achieving exit velocity for acquisitions or listings. You could have money trapped for a decade in a mediocre business going nowhere.
Unlike listed stocks where you can cut losses, startup investments mean watching companies struggle while unable to exit. The math only works if your few winners generate returns large enough to cover all your losers plus opportunity cost - this requires portfolio diversification across 10-20+ startups, not picking 2-3.
Only Deploy Capital You Can Afford to Lose Completely
Startup investments should be under 5% of your total portfolio, using genuinely discretionary capital. This isn't where you put kids' education funds or retirement savings - it's where you allocate risk capital for asymmetric upside potential. Focus on sectors you understand, founders with execution track records, and business models with clear monetization paths.
Avoid startups burning cash on customer acquisition with no path to profitability, following hype cycles, or solving problems that don't actually exist. Most investors are better off getting venture capital exposure through AIFs or PMS funds where professionals handle due diligence and portfolio construction.
