You want to diversify your portfolio by investing in a startup, but you’ve heard startups can be risky. You’re not wrong: 90% of startups fail. How can you find the best startups to invest in?
We’ve all heard the stories: A twenty-something throws their investable cash into a startup. The startup takes off and becomes the next sensation, and that twenty-something skyrockets to multi-millionaire status, seemingly overnight. Maybe you even know someone who has a story like this—and now, you’re ready to join in the fun and see the best assets to buy in your 20s.
Let’s look at some common categories of alternative investments for startup businesses and how to find one with the best chance of offering you massive returns.
Finding The Best Startups To Invest In
Before we can discuss how to find the best startups to invest in, we need to talk about the risks and rewards of investing in startups. Why should you invest in a startup? What makes this type of investment different from investing in a traditional asset like stocks or bonds?
Investing in a startup is different from traditional assets because a stock or a bond is a public investment, whereas a startup is a private investment. Investing in a private asset is an excellent way to diversify your investment portfolio.
Additionally, investing in startups gives you a chance for a much larger return on your investment than investing in stocks. The reason for this is that, by the time a business is traded on the public stock market, it has reached a level of stability that makes the investment less “risky” but also means there is no longer as much opportunity for explosive growth.
You can invest in startups using a multitude of different methods. These methods include:
- Becoming an Angel Investor
- Knowing a Startup Founder
When it comes to investing in startups, knowledge is your greatest asset. Remember that nine out of ten startups fail, meaning nine out of ten startup investments will flop. Choosing a startup in an industry you’re familiar with will give you a greater chance of choosing the right opportunity, hitting a unicorn that will cover for any startup investments that didn’t pan out—and then some!
We’ll discuss some of the industries you should watch for startup investment opportunities in 2022. We’ll list a few examples of startups you may want to pursue in 2022, but we also encourage you to find the best startups for you!
You can use a few different tools to help you find amazing startups to pursue for your next investment opportunity. Check out tools like EquityZen or CartaX to hunt down incredible pre-IPO investment opportunities. You’ll want to note that EquityZen is only available to accredited investors.
Tribevest is passionate about all investing opportunities being available to all people. We’ve helped hundreds of Tribes invest millions of dollars in opportunities like this. Let’s look at some of the industries we think might have some great startup investment opportunities this year and into the future.
Disclaimer: This content is for educational purposes only. Nothing on this website should be construed as investment advice.
1. Tech & SaaS Startups
It’s 2022; we’re well into the information age. It should come as no surprise that tech and SaaS startups are still a great option to watch for investment opportunities.
What is SaaS? SaaS stands for Software as a Service. Essentially, SaaS companies allow you to access an application or software over the internet instead of installing and maintaining it on your computer or network. This model has skyrocketed in popularity in the last decade, and it shows no signs of slowing.
The possibilities for tech and SaaS companies and products are endless, leaving plenty of room for new startups to come into the market and make an impact. However, this endless realm of possibilities sometimes creates false opportunities.
Many SaaS startups fail because they set out to use their product to solve a problem that customers don’t really care to solve. Before you invest in a tech and SaaS startup, ensure you believe their product is likely to make a real impact for their target market.
Some tech and SaaS startups you may want to take a look at in 2022 include:
- ProtonVPN: Founded in 2016, ProtonVPN covers 61 countries, providing high-speed, high-security VPN services.
- Linktree: Linktree was also founded in 2016. This application lets you create a single hub for all your important promotional links. Basically, they are the originators of the “link in bio” phenomenon.
- Shapr3D: Shapr3D has been around since 2015. This computer-aided design application works with Apple products, including the Apple pencil.
2. Blockchain & Crypto Startups
If you haven’t yet jumped into the blockchain and cryptocurrency pool, no worries, there is still plenty of time and plenty of opportunity in this space. Many industry experts predict that crypto is going to be the “next big thing,” and plenty of startups are popping up to serve that need, eager to get a piece of the action.
One positive about investing in a crypto startup is that the entire industry is young. There isn’t a Coca-Cola or a Wal-Mart to compete with in this space yet. The downside of investing in a crypto startup in 2022 is that there is a lot of competition. With dozens of startups cropping up in this space, a large number of them will inevitably fail.
A few blockchain and crypto startups to keep an eye on this year are:
- Zerion: This decentralized finance startup allows users to explore everything from tokens to NFTs in their platform. This tool can track your net worth across multiple crypto wallets.
- Bitpanda: Bitpanda was founded in 2014 and allows users to invest in crypto, precious metals, and stocks in a single platform.
- ZenLedger: One common challenge of investing in crypto is the complicated taxes. ZenLedger’s product helps solve this issue by giving users a place to compile all their crypto transactions, print tax forms, and more.
3. Retail and eCommerce Startups
ECommerce has exploded in the wake of the 2020 COVID lockdowns, seeing 44% year-over-year growth during the pandemic alone.
Companies were forced to get creative during COVID lockdowns, discovering that products previously considered too difficult to sell online could easily be handled through an eCommerce site with the right precautions.
Investing in retail is always risky since there is quite a bit of overhead cost associated with this industry. Startups will need to account for warehousing, shipping, and other supply chain issues. Hiccups with inventory can spell trouble for a retail or eCommerce startup.
Some of the eCommerce startups you may want to explore in 2022 are:
- Snackpass: Founded in 2017, Snackpass allows you to order food online and pick up at the restaurant. By focusing on college town markets, they’re seeing explosive growth so far.
- Cazoo: Cazoo was founded in 2018 and is based in the UK. This company is a used car buying service that focuses on vehicle inspection and offers home delivery services.
- Winc: Winc has been around since 2011, but it’s picking up more steam these days. This wine delivery service uses consumer data to create new wine blends that will fit market trends.
4. Energy Startups
The next category of startups you may want to consider are energy startups. Renewable energy has been a part of the international conversation for decades now. Companies looking to solve the global energy crisis stand to gain financial winnings, fame, and accolades.
Energy startups are a great option for investors looking to not only make a great return on their investment but also hoping to change the way the world does things. If you believe strongly in alternative energy, investing in an alternative energy startup might be a great option for you.
The downside here is that hundreds of companies have tried and failed to change the energy market landscape. You’ll want to do your homework to see what the startup you’re considering investing in is doing differently that gives them a chance to succeed.
You can consider alternative energy startups like:
- Element Solar: Element Solar, as the name suggests, is a solar energy company. They offer home solar panel installation. Additionally, they donate 250 watts of clean energy to third-world countries and plant 200 trees for each system installed.
- GoSun: GoSun offers solar-powered appliances, generators, and more. For the “van life” generation, these products can allow users to live off the grid and enjoy modern comforts.
- Palmetto: Another solar energy company, Palmetto’s edge is trying to make going solar as cost-effective as possible. Using data and mobile tracking applications, users can track solar panel performance and get maximum performance from their panels.
5. Insurance & Healthcare Startups
When looking for a startup investment opportunity, the last industry you want to keep in mind is healthcare and insurance. The current healthcare market needs innovation, and healthcare startups are ready to provide it.
Similarly, insurance-related startups are seeing significant growth in the current market. In early 2021, insurance-based tech companies surpassed the $15B mark in financing. Startups in that space are growing quickly, meaning the space is full of opportunities.
The downside in healthcare and insurance startups is that the current healthcare system is not set up in a manner that is friendly to innovation or change. This hard truth makes it difficult for healthcare startups to survive in the space.
Some of the startups in this space you might take a look at in 2022 include:
- ManyPets: ManyPets was founded in 2012. This company provides health insurance for cats and dogs. These plans are billed monthly and provide coverage, online claim-filing, and complimentary video consultations with real vets.
- Next Insurance: Founded in 2016, Next Insurance provides property, liability, and auto insurance to self-employed workers and small businesses.
- BetterUp: BetterUp is a mental health mobile app that launched in 2013. It is already in Series E and was recently valued at $4.7B.
How To Access The Best Startups To Invest In
Investing in startups is an excellent way to support growing businesses you believe in and build your own wealth at the same time. Even if the startup you choose to put your weight—and your cash—behind doesn’t become the next mega-conglomerate, you have the opportunity to gain massive returns as the company grows.
Of course, you won’t be able to access these benefits if you can’t afford the price tag to invest in a startup in the first place.
That’s where Tribevest comes in! It’s our mission to make all asset classes available to all investors. When you pool capital with friends and family, anything is possible! Our platform has alignment tools, a communication hub, and full-service banking features. To see all the ways Tribevest can help you and your friends invest in the next amazing startup, check out our Features and Pricing page!