10 Reasons to Invest in a Startup

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By Linda Doell

10 Reasons to Invest in a Startup Before Research in Motion, Corel and Ballard Power Systems became the powerhouse companies they are today, they were fledgling startups.

And before those companies soared, there were investors willing to pour funds into their futures.

Ready for your chance to get in on the ground floor? Here's are 10 good reasons to invest in a startup company.

Less competition: For investors anyway, which could mean greater returns and the ability to be more selective in the startups that get funding. GrandBanks Capital Managing General Partner Charley Lax told Panorama Capital there were about 10 venture firms in Canada, down from around 100 a decade ago.
Government backing: The Canadian government has removed a tax law called Section 116 which had effectively been blocking foreign investors from Canadian startups. The government also will reimburse tech startups up to 65% of their research and development expenses.
Access: Investors in startups have easy access to insider information -- legally -- because of the nature of startups. Each detail of the company is laid out for the investors.
Financial gain: Investors with the wherewithal to know a good deal when they see it can take advantage of the opportunity to buy low and then sell high when the company has an initial public offering or is bought out by another company, wrote Joe Alvarez, founding partner at NewGate Capital Partners.
Be a mentor and teach: Some investors, particularly angel investors, look for startups that they can not only invest money in, but also impart their experience to and teach what they have learned in the business world.
Flexible business agreements: Investors can often negotiate deals with startups that they might not get at a publicly traded company.
Community involvement: Startups can provide great satisfaction to investors who want to invest locally. Investors can help create jobs and stimulate the local economy.
Exciting: Taking risks can be an exhilarating ride and startups provide that rush because while the potential return on investment could be high, the failure rate of startups is equally high. Less than a third of startups survive to their 10th anniversary.
Fosters creativity: Startups are often on the cutting edge of the industry they're working in and such entrepreneurs like to think outside the box. Dan Morel of StartupNorth pointed to the real-time messenger application Kik as an example.
Hands-on involvement: Startups allow for greater amounts of involvement than do more established companies. Penning testimonials about the company's products or promoting them locally can help the startup be successful.

So investors, do you have anything to add to this list? What makes you want to invest in a startup?