Creating a startup portfolio simply and clearly in 2025 I.

I started writing about startup investing because there simply isn’t a comprehensive article on the topic in most languages. In 2021, I created a complete startup portfolio, so in 2025, I updated my articles on startups based on my real-world experiences. You can find the rest of the startup series here:

1. 🚀Creating a startup portfolio simply and clearly I.
2. 🚀Startup investments and what you need to know about them II.
3. 🚀Operation of startup platforms in 2025 based on real experiences III.
4. 🚀Crowdfunding and what you need to know about it in 2025 IV.

The topic is very diverse and even in global terms, it is little known compared to, for example, the stock market. Everyone has heard of it or thinks about it, but no one knows how to start investing in startups. The problem with most articles is that they do not give specific examples where investors can start, there are a lot of generalizations. I will try to lift the veil on these too, but it will be a long journey, which I invite you, dear readers, to join.

💡Where you see the pushpin symbol, I am describing what happened based on my practical experience, because I find this much more realistic than the many theoretical concepts that can be found online.

🚀What is a startup?

A startup, as the name suggests, is a company in its early stages. The term was originally a combination of the words start-up, as it refers to the start-up/rise of initial companies, and the initial capital required for this. Based on this, however, any company that was founded yesterday could be a startup, meaning that we need to supplement the early phase with the words “significant growth potential”. It is important that the company not only thinks this about itself, but that there is actually visible growth in it. This actually means that the management strives to conquer world markets, where the company’s services or products can grow exponentially. What does a fast-growing company need? First of all, a lot of capital, and this is where you, as a prospective investor, enter the picture.

As the value of the company's activities increases, which is also increased by the capital invested, the company's value also increases. Valuation is a very fundamental problem in startup investments, which I will return to later, but for now let's accept that the valuation of a startup is real. If this value reaches a high enough level, the market tends to attach labels to such companies. At a company value of 1 billion dollars, companies are usually labeled as unicorn startups. At 10 billion, it's a decacorn, at 100 billion, it's a hectocorn, but this is really quite a big blind spot. You can see the Top 10 most valuable startups in the table below:

The above list comes from CB Insights as of 2025, which is a site that collects data on startup companies. There is also such a list with 657 participants (CB Insights Unicorn Companies Research), although I wouldn't call the companies on it startups anymore, they have simply outgrown this category.

☝🏻It is important to note that these are all private companies, meaning they are not traded on the stock exchange, as this will be an important consideration later.

📈Startup versus listed companies🚀

Since the blogis mostly read by people who are primarily interested in stock investing, so it is worth approaching startups from the perspective of listed companies.

📈Special features of listed companies:

• their shares are easily accessible and freely tradable
• a supervisory body, e.g. the SEC in the USA, regulates and supervises their operations
• are required to publish quarterly and annual reports on their operations, I wrote about this in this article
• They have a history from which we can draw conclusions about their corporate culture, operational characteristics, cash flow, etc.
• their metrics and price movements can be analyzed using fundamental and technical methods
• most have stable, growing income, are able to generate profits

📌In practice: I analyze publicly traded companies on a daily basis using fundamental analysis, but this practice has been available to investors for over 100 years. If you are interested in my writings, you can find them here. blogYou can also find detailed analyses at (iO Charts stock analyses), from companies like Adobe, Nike or, say, Porsche.

I don't think I surprised anyone with the above list. The problem with young startups is that almost none of these are true for them.

🚀Special characteristics of startup companies:

• In a sense, they are closed companies, their ownership rights cannot be freely given and taken. Since they are not present on the stock market, they do not actually have shares in the traditional sense.
• their market is much less regulated than that of a listed company
• they do not have to publish quarterly reports, only annual ones (although more correct companies do provide information in quarterly/half-yearly/annual breakdowns)
• They have no history, so they don't have much data, you can't draw conclusions about their internal workings, you basically have to invest in a story or in the management team
• they don't really have metrics, what they do have, they change extremely quickly
• 95% of them are losing money, they have some income, but it's growing incredibly fast, along with the costs. That's exactly why they need to raise a lot of capital.

Based on the above, it can be quite intimidating at first to look at a startup company through the eyes of an equity investor. Why is it then that some people are willing to invest in these companies? The explanation is simple: they can produce brutal returns. Since everyone always brings up Facebook as an example (FB), so I'll stick with that for now. In 2012, at the time of the IPO, the company had a market capitalization of 939 million USD, and in June this year it was 1.7 trillion. That's a multiplier of more than a thousand times, but what if you had invested in it as a private company when it was only worth 93 million USD? Then you would have a multiplier of more than ten thousand times compared to the current exchange rate. If you had invested 1000 USD then, you could now retire early, because your investment would have returned more than 10 million USD.

💻Startup data sources: What and where to look

You can start collecting data from two sides, there is a lot of knowledge related to the basic concepts that you need to process. To get an idea of ​​what a startup is and how the review is done, I highly recommend the Shark Tank series. Although it is a TV show, the angel investors featured in it are credible people, and what is said about them is more or less true.

🇭🇺Hungarian examples of angel investors🇭🇺

For example, Gyula Fehér – the Ustream founder – the Oktogon Venture Capital one of the owners, among others With Ashton Kutcher they invested together in Bitris Then there is Péter “Petya” Balogh, whose name may be familiar to you in connection with the iGo navigation software developed by Nav N GO. He is one of the most active angel investors in Hungary, his page is BaconOf course, I could have highlighted something else, the other sharks are also very interesting characters.

🧠Common sense helps

While watching the seasons of the show, it occurred to me that what if I took notes on the questions they ask entrepreneurs and answered them when I wanted to invest in something? Here are some examples:

• How long has the business been in existence?
• How many active customers do they have, how many products have they sold to them?
• How many large department store chains are they affiliated with?
• How much is their income and profit?
• What kind of work do they do? How did this math work out?
• Why is the company valued so high? Isn't that exaggerated? What is the P/S?
• What is the personality of the leaders, what kind of education do they have?
• How much ownership does the CEO have in the company? From which company is this stake being offered? From a new or existing company? Who owns the new company?
• Who owns the real estate and the means of production?
• What is the competitive advantage that will prevent others from copying the product? Trademarks, patents?
• How big a market is the product, why will it be popular?

As you can see, they usually didn't ask anything that was tricky or couldn't be answered meaningfully, but they didn't succeed in the vast majority of cases. So, when you fall in love with a startup company, ask yourself and the company how they came up with the numbers you found in the pitch deck. On what basis do they think their revenue will be ten times this much in 3 years?

📌In practice: This is the 5th year I've been building my startup portfolio and I've NEVER seen a company that has delivered on their projected growth. That's why it's worth at least halving these. Margins are often negative because companies are loss-making, so you will NOT have the numbers to make a thesis similar to stock analysis for startups.

Startup databases

As with stocks, there are large, paid databases where you can hunt for information. Unfortunately, these services are terribly overpriced. Such sites are not really aimed at the average person, but rather at angel and institutional investors. They are great for searching company data, making lists, and reading analyses. Here are a few that I find worth mentioning:

• CB Insights: I think it's one of the best sites for finding data. They have really cool lists, e.g. startups over 1 billion, great analyses. They also have the Mosaic metric, which is unique, doesn't exist anywhere else. They have a really good service that shows how capital was invested in which company, who the financiers are, etc. They have a seven-day trial version.
• Crunchbase: unfortunately I think this site is bad. It's not very expensive, but it's mostly publicly available, and they show completely unreliable data. I think the interface is crappy, but that's just my opinion. For some reason, a lot of people use it, I checked it out once during the trial period, but I think there are much better sites than this. It has a 7-day trial version.
• Deal room: basically a data source intended for companies. What I liked about it is that it shows the revenues of some companies in annual breakdown, as well as various popularity parameters. There is a free 10-day trial version, but you have to do a little trick to access it as a private person.
• Linknovate: interesting site, you have to enter keywords, and based on that it tries to list relevant content and trends. I didn't really like it, it's too sissy-fussy, but maybe someone will like it. It can be used for "scientific work", then it's free. Similar site: Mergeflow

Firematter made a relatively good presentation about data processing companies, which I unfortunately only found afterwards, but it might make your life easier (Report: The Top Innovation & Startup Scouting Database 2021). The data of most of these sites is not accessible from the outside, but you have to contact them personally to request a presentation. These are not included in the list above.

📌In practice: for my real investments, I very rarely used the above sites, but mostly never. The reason for this is that in many cases my targets were simply not found in their databases. It is worth reading the general analyses to get an idea of ​​how this world works, but in reality, individual research is much more valuable. Use AI platforms like ChatGPT to collect data about the company.

📚Startup data from official sources

It is a good idea to look up companies from official sources. The availability of such websites is different in every country, as I have mainly invested in Anglo-Saxon startups so far, so I am just including Companies House's company search engine here as an example (Companies House), which lists companies registered in England. Something like the e-company register in Hungary (e-register), you can find out basic information about companies. There are three ways to search in the English Companies House, by company or manager name, but companies also have a company registration number. This is important because there are a lot of companies with similar names, while there is only one company registration number, so it is worth using this.

A good example of this is a startup called Glint (glint). It runs under the name Glint, their website is www.glintpay.com, but Companies House returns 119 results for the name Glint. Their registration number is 09507932, and it only returns one result for that, so that's the obvious one. You don't need to worry about this for now, just note that it exists, it will be important later. By the way, Glint has been operating since 2021, it is one of the surviving startups, more than 4 years after I first saw them.

Many fintech startups are registered in one of the Baltic states, so anyone who wants to search among Estonian companies can try the Teatmik website (Teatmik).

🤯Startup studies: know the basics

I don't know how many articles and studies I've read on the subject, but I think the number is close to 100. Most of them are pretty meaningless, general blah-blah about investing, without specific examples. There are a few that are worth skimming through, but they also contain more or less basic, theoretical information. However, you should be aware of these if you want to invest in startups:

• Syndicate room: startup investing guide
• Board of Innovation: startup investment guide
• Ourcrowd: The Guide to Successful Startup Investing

There are a lot of others, but these are more than enough for you to skim through, and there is a lot of overlap in them, but they are good for a foundation.

Startup books

Bernhard Schroeder's name is often mentioned on the subject, especially his book Startup Culture Mindset, but he has other books on the subject as well. I haven't read his works, but there is a pretty good video on TED Talks where you can get an idea of ​​the gentleman, I've linked it below. He is the one who came up with the idea of ​​the Lean Model Framework, which adapts the structure of startups to the accelerated world. I would like to recommend two more books that I have read:

• Eric Ries – the Startup Method
• Peter Cowley - The Invested Investor

Eric Ries wrote another book, Lean Startup, which is often mentioned on the topic.

Interestingly, I couldn't find a single book about direct startup investment, that is, about the method by which this should be done, but I probably just missed it, so let's hope you find them.

Types of startup investments

Now that we have the basic data sources, let's run through how to invest in startups. There are countless articles on this topic online, which I think are unnecessarily detailed. Most of them are out of the question for the average person, so I will only talk about them in passing, instead focusing on what I have experience with and that may be relevant to you.

💰Venture capital funds

It really affects few people, but there are venture capital funds that invest in startups. This is basically a big man's game, you can't get in with small money, we're talking about millions here, in many cases in dollars. Moreover, only accredited investors can invest in these, for which, for example, in the USA the basic requirement is $1 million in assets. In other words, here you have to jump over barriers that will immediately eliminate 99% of readers.

However, there are publicly listed venture capital fund companies, such as the Blackstone Group (BX), whose shares can be purchased. The other option is the so-called Special Acquisition Company, SPAC, which is a publicly traded company. I wrote about these in the IPO article. SPACs do nothing more than buy other unlisted companies, which then go public. I avoid the former simply because I can't choose what the company invests in, and SPACs because the success of the investment, and the risk involved, are simply incalculable to me.

A third option – although I think this is just a technical question – is to buy an IPO ETF that includes companies that have been listed on the stock exchange, immediately after the IPO. However, I think this misses the point, it is nothing more than buying shares of a listed company, and the early phase of startups, and thus the high growth, is left out of the formula.

👼Angel Investing

This is a more interesting form for small investors, but here too one of the thresholds to jump over is the high entry amount. We are talking about a few million forints per startup. However, angel investors can not only be passive individuals, but can also mentor companies, join the governing bodies, and help build the company with their expertise. The characters in the series Among the Sharks are typically such individuals. There are sites dedicated to angel investment, but since I have not tried this form, I have no experience in this direction.

There is another opportunity to appear as an angel investor in the lives of companies. You can practically fulfill the same role by choosing the direct investment option on various crowdfunding platforms. The minimum amount of money on sites such as Crowdcube and Seedrs is typically 25-50000 British pounds (crowdcube, seedsrs).

🇭🇺 Hungarian peculiarity in Hun🇭🇺

Hungarian angel investors are In Hun It is led by Péter Csillag, an angel investor and shark.

🤲Crowdfunding: the sandbox of the little people

I've reached the part that actually makes this article most worth reading. I don't think I need to introduce crowdfunding, but most people think of it as a way to "subscribe" to a product that isn't yet on the market. A significant number of individuals contribute the money needed to produce it, in return for which they receive some kind of discount, such as a price reduction or extra accessories. The two best-known such sites are Kickstarter and Indiegogo (Kickstarter, Indiegogo), but you should also apply this logic to sites created to finance startup companies.

🌐Benefits of crowdfunding

In fact, crowdfunding is a win-win for both companies and ordinary people. For companies, it is primarily advertising, since the amount of money collected here is far below the amounts offered by venture capitalists. And small investors can invest in the future “best in the world” company with almost any small amount. Let’s run through these advantages:

🏢From the company's perspective

• huge advertising, media exposure
• Small investors do not have a say in the management of the company, unlike angel investors and venture capital funds.
• companies only have to negotiate with the platform, not with each investor individually
• gauge the reactions of the investment community
• recurring campaigns can be further hyped with previous ones

🧑‍💰From the investors' perspective

• you can get in with a small amount
• relatively transparent data – pitch deck, basic information, etc. – collected in one place
• no need to sign a separate contract with the company, just use the platform
• lots of offers in one place, you can choose
• some sites pre-filter offers, which is a built-in safeguard
• there is a site where there is a secondary market, so shares can be sold
• you can ask questions directly to the managers on the forums, which is one of the most useful sources of information

📌In practice: leave the pre-screening as it is, these platforms live off the fees. They don't care at all whether your investments will be successful in the long term or not. Nothing proves this better than the fact that Republic, formerly Seedrs, has increased the costs of buying and selling and reduced the commission for successful startup exits, because they have not been completed or in much smaller numbers. So you always have to do your homework, the platform will only check if the company is financially sound and not a scam, or not even that.

Crowdfunding sites

I read on Dealroom that in Europe, the English and Germans invest the most in startups. Since it is easier for me to use English than German, I basically started looking for such sites, which is how I found Crowdcube and Republic (crowdcube, Republic), but of course there are about 30-40 others. You can register with a regular Gmail email address, so you can access a relatively transparent interface, which in itself does not involve any investment obligation. It is worth looking around at both and getting to know the sites a little. However, what is much more important is what advantages and disadvantages come with using them.

crowdcube

Advantages:

• one of the largest platforms, with over £1 billion invested in 1200 startups
• startups are pre-screened (this is called pitch fact-checking)
• FCA regulates their operations (this is the financial regulatory body of England)
• Their portfolio manager is simple, transparent and you can export your investment lists to a CVS file.
• In England, taxpayers receive a 30% tax break on certain investments under the EIS and SEIS systems.
• You can also initiate investments directly and as a nominee, when the platform acts on your behalf.
• you can invest from as little as 10 GBP
• They have funded quite a few big names, they are especially strong in fintech, e.g. Corners, Monzo, free trade, Brewdog

Disadvantages:

• The biggest disadvantage is that it does not have a secondary market, this is currently being developed, called Cubex, but it is not yet available, it only works through the Freetrade app
• I've heard a lot of bad things about their customer service, but I have no personal experience with it.
• they do not have an automatic investment function

Tariff: 1.5% of the investment, but a minimum of £0.5

📌In practice: I haven't invested in Crowdcube for 4 years because I think it's really bad. First of all, they haven't been able to program Cubex, or the secondary market, for 5 years, secondly, their interface is really crappy and they haven't improved anything in years. What I could show from my 4 startup investments are two liquidations, a minimal stake in Curve, and a company called TipJar, which is growing somewhat.

I must add that the UK's exit from the European Union has been quite a blow to such companies, they are already focusing on Europe on their website, they have raised EUR 240 million, which is interesting because they previously referred to GBP 1 billion. In the image above, I have saved what they said in June 2025, and we will look at it again in a few years, then what is the narrative.

Republic (formerly Seedrs)

Advantages:

• This is also a large platform, having helped almost 2400 startups (up from just 1200 four years ago), worth £3 billion, including the likes of Revolut, paysend, WeTransfer
• Everything else that applies to Crowdcube
• there is a secondary market where company shares can be bought and sold (although liquidity is obviously limited)
• you can also invest automatically (which I don't use, but it might be good for others)
• acquired by the American Republic in 2023, creating a much more capital-rich company

Disadvantages:

• quite high profit fee
• the liquidity of the secondary market is not very high

Tariff: They charge a fee of 2.5% for investments and purchases, with a minimum of 5 and a maximum of 250 USD (previously 1.5%). There is a separate fee for successful startup sales, for which they charge 5%, you can read about these on their website: Republic Europe Fees

📌In practice: Republic is an order of magnitude better platform than Crowdcube, but when Republic acquired it, its fees increased. There is a secondary market, but for startups that are in trouble, there will not be many buyers. I have a very small position that I haven't been able to throw out for 2 years because the dog doesn't need it. So don't count on the secondary market that much in reality, but what works, they buy it right away, so these can really be sold.

✅Disadvantages and advantages of startup investments❌

Now that you have an idea about startup investments, it's worth discussing the pros and cons. I'm intentionally starting with the cons, if you're not interested after reading them, then close this article and read our other articles about the stock market: Articles about stock investing

🎲Startups are risky

One of the big problems with startup investments is that with huge profits comes an equal amount of risk. The two things go hand in hand, increasing in a roughly linear fashion, meaning that as profits increase, so does risk. I’m going to make a lot of people sad when I say that 9 out of 10 startups will fail and never make it to the stock market. The earlier a company is in its stage, the higher the chance of bankruptcy, but the higher the expected profit. Unfortunately, there’s even less data available at that point, so I can’t really call it an investment. It’s more like a casino to pick the Facebook of the future from such early companies.

Interestingly, 25% of startups fail in the first year, and this rate continues to decline year by year as time goes on. Of those that survive four years, only 14% fail. In other words, the tendency is that as time goes on, the chance of failure decreases for startups that are still “alive”, but the number of startups that fail increases overall. The change comes in the fifth year, when only 13% of startups are on the market, but obviously this number would deteriorate even further in the longer term. However, it is also worth asking the question: if a startup is already 10 years old, can it still be considered a startup at all? And also, what did they do for 10 years if they still failed to break out in all that time? Let's draw the conclusion: Companies that are too young or too old are not ideal from an investment perspective, but this in itself obviously cannot be a main selection criterion.

A personal story

I would like to share a personal story here. In 2019, I invested in a startup for the first time on Crowdcube, putting a few thousand forints into a fintech company called Curve (Corners). The amount shows that it was not my intention to earn my living, but to throw away my student money, and I recommend the same to you. Treat every startup investment as if its value immediately drops to 0. I wrote this amount down to zero, and then I started studying the system. How the platform works, what's in the company's pitch deck, what press releases are coming out, and so on. As you can see, here I primarily wanted to access the extractable information, and this can be done with an investment of even 10 pounds.

🔥It's hard to leave a startup

The other important thing is that these are private companies, so the “shares” you get for the money you invest in them are not the same as what you would own in a publicly traded company. That is why exiting startups is an extremely difficult task. Fortunately, it is not impossible, here are some options where you have a chance to get your money back:

• the company is able to "fight" its way onto the stock exchange, for example through an IPO
• acquisition: another company buys it, or a SPAC buys the company, making it go public
• the shares are sold on the secondary market of the crowdfunding platform

It is no coincidence that one of the main questions in the pitch deck - the company's introductory document - is how the exit, or leaving the company, is implemented.

📌In practice: Hard to get out is a very mild word for how unsellable startup shares sometimes are. Specifically, the market freezes, not only because the company you want to sell is not good, but also because there is no venture capital on the market. There was still some in 2021, but in 2024 there is nothing. This also crushes the valuation, I have a prosperous investment that is worth half of what it was, while it has four times! as much income as when I bought it and is profitable. This is the startup world.

🙈A startup is opaque

Young companies have no past. This also means that the less time has passed since their founding, the less company data is available. These are not listed companies, there are no quarterly reports, and no 30-year dividend payment history. And no one should be surprised that a startup does not generate a profit, it is more of a miracle if it does. The very first, pre-seed phase companies are the riskiest, it is not for nothing that this period is called the valley of death. In many cases, there is only an idea or a concept, even the prototype product or service is only in preparation. However, if the idea is successful, you can reap huge profits later, but these “small companies” are not really in the investable phase yet.

Later, in the seed and series A/B/C etc. phases, these companies are much more transparent, but here it is important to pay attention to two things. The company cannot be very old, because then the growth did not take place at a sufficient speed, and it does not really have the extra potential. The other is that if the company cannot show convincing numbers, you should not invest money in it. It's okay if you don't have a profit, but if you don't grow, then there's almost no chance of achieving profitability. These seem very clear when written like this, but you'll see that unfortunately in real life they are not at all.

🌀The value of a startup is difficult to determine

It follows from the above that it is very difficult to determine the value of a startup, as they are not evaluated under market conditions. There are several methods by which this can be done, the English site Upconsuel has a good description of this (Startup Valuation Methods). The point is that they usually determine a so-called pre-financing value, and after the given financing round is completed, the company's value is increased with the money raised there. This is not a really exact method, but rather a kind of "this is approximately what the company could be worth", a gut-wrenching thing. Since there are no metrics like P/E, since there is no profit, these can be quite inaccurate.

Overall, I can say that if you have a hard time enduring 10-20% stock market drops, then stay far away from the world of startups. If you can handle the above, don't put more money into startups than you'll ever need. I've put less than 1/10th of my stock portfolio into startups on a cost of capital basis, and I'm sure I'll be learning this whole genre for years to come, and you should also look at it as learning money.

📌In practice: I think the valuation of startups is pretty random as long as there is a lot of money. In retrospect, I would say that you should only invest in startups when there is hardly any money in the market, because at that time you can buy into companies ridiculously cheaply, meaning the biggest fun is in underpricing. I was lucky enough to have this happen to me, so it is a completely real possibility that there is no money in the market, but the company needs to raise capital and therefore the pricing is low. Usually, large venture capital funds dictate and if they push down the valuation, it can be beneficial for you too.

Advantages of startups

For those who have made it this far, I have good news: the above disadvantages and risks are significantly compensated by the brutal expected return. To cite my own example, Curve's value increased by 293% in two years, which is almost 150% per year. Of course, it is another matter that they did not even reach the IPO in 2025, so this is not a realizable profit.

Startups are also interesting and exciting, and you can be part of something, almost from the beginning, which is certainly not the case with a mammoth company listed on the stock exchange. There is also the joy of discovery, meaning that you have to dig your own holes, and for this there is a significant reward. It should also be remembered that you do not have to look for a broker, sign all kinds of contracts, learn the interfaces of the given broker, and bask in the price movements, since you cannot day trade these companies. Since startup companies are not so much in the crossfire of the media, there are not 10 articles published about a single company every day, which changes your emotions back and forth. I will never forget that in 2021, when the oil companies were in a deep decline, according to statistics, hundreds of press reports were published about Exxon Mobile every day (XOM), and about 50% of them predicted the end of the company, and the other half said what a bombshell deal it would be to get into one now.

So, in some ways, investing in startups is more relaxed, there's a kind of inertia to it. The other interesting aspect of crowdfunding is that it's like an advertising newspaper. If you don't like the companies that are currently available, then in a few weeks there will be new ones, with colorful and fragrant brochures - pitch decks -, so there's really no need to rush. Just do it nicely, thoughtfully, and that really calms me down.

📌In practice: Contrary to what is written on the internet, there are two ways to make a lot of money with startups. Since the market is illiquid, mispricing often occurs. It is quite difficult to notice this, but if you have small positions in many companies and follow the development of the companies, you can find such ones. The other is if you are lucky and the larger investors do not dilute you and the company reaches a successful exit. I admit, I have not seen this before, but there are examples of it, I just have not been involved in such an investment.

Summary

I wrote about quite a lot, but unfortunately the main point was left out, the specific company analysis. It simply didn't fit in this article, because then the content would have been infinitely long, and it wasn't short anyway. But don't panic, so at least those who realized along the way that this thing wasn't for them can now let it all go with a calm heart, they don't even have to fight their way through the company evaluation. And if I've piqued your curiosity, read the other articles about startups on blogon, these can be found here: Startup investmentsIn the meantime, keep the basics in mind: extreme profits come with extreme risk, it's very difficult to exit companies, but once you succeed, you'll be very happy because of the huge profits.

Frequently Asked Questions (FAQ)

What is a startup?

A startup is a start-up business that is based on an innovative idea and aims for rapid growth, usually in a technology or digital field. Characteristics of a startup:

• 1. Innovation: Startups often come up with some kind of innovation, whether it's a product, service, or business model that didn't exist before or is significantly better than existing ones.
• 2. Scalability: The goal is not to create a small stable enterprise, but to build a business that can grow quickly, even internationally.
• 3. Risk and capital requirements: Startups often require external investment capital, such as from angel investors or venture capital funds, as they may not necessarily generate profits in the initial stages.
• 4. Experimental phase: Startups often test, experiment, and pivot (change direction) to find real market demand and a sustainable business model.

Using a simple example: A new burger joint isn't a startup because it copies a known model. But an app that uses artificial intelligence to recommend personalized diets and deliver ingredients to your home could be a startup.

Who is an angel investor?

An angel investor is a wealthy individual who invests their own money in startups – usually in the early, risky stages – in exchange for a stake in the company.

Main characteristics:

• It helps in the early stages: when the startup has no or minimal revenue yet and a traditional bank loan is not an option.
• Uses own capital: You do not invest as a fund manager or company, but as an individual.
• You will receive a share of: In exchange for your money, you acquire an ownership stake, e.g. 5–30%, in the business. It is not worth acquiring a very small stake, because then it will have no impact on the operation of the company and even in the event of a large profit, you will only realize a relatively small amount of money.
• More than money: It often provides experience, connections, and advice; this is called smart money.
• The purpose of profit: the long-term profit that the startup can realize after a successful exit, e.g. sale, going public, etc.

Using a simple example: If someone comes up with a new healthcare app but doesn't have the money to launch it, an angel investor might give them, say, €30 to build the first version - in return, they'll get a 000% ownership stake.

Who is a startup investor?

A startup investor is a person or organization that invests money (and often knowledge and connections) in a startup business with the aim of generating future profits through the growth of the company. A startup investor can invest in several ways:

1. Angel investor

A private individual who invests his own money in early-stage startups (I wrote about this in detail above).

2. Venture capital (VC)

A professional investment organization that manages money from external sources, such as pension funds, banks, and government funds, and invests it in startups, typically in the growth or scaling stage. It works with larger amounts than angel investors.

3. Accelerators and incubators

They are not classic investors, but they often provide a small amount, mentoring, office space, and connections to a fledgling startup in exchange for a small stake.

4. Crowdfunding investors

They are ordinary people who support startups with small amounts of money through online platforms such as the previously mentioned Crowdcube, Republic, or StartEngine, in exchange for equity or other rewards.

Startup series: what to watch if you want to get smarter?

You can watch countless series about startups online or on various TV channels. These are typically transferred from one country to another on a franchise basis, and they may be renamed, but the basic logic is the same.

🦈 Shark Tank (USA)

• The most famous startup reality show.
• It has been running since 2009 and has produced hundreds of episodes.
• It includes investors such as Mark Cuban, Kevin O'Leary and Barbara Corcoran.
• Several successful startups have started here (e.g. Bombas, Scrub Daddy).

🦈 Dragons' Den (UK, Canada, Japan, etc.)

• The original format that Shark Tank was made from.
• It has been going on in the UK since 2005.
• It started in Japan even earlier under the name "Manē no Tora".
• In Hungary, for example, it was broadcast under the title Among Sharks.

🎬 StartUp (Netflix, 2016-2018)

• It's a fictional series, not a reality show.
• It tells the story of a tech startup (based on digital currency), embedded in crime and drama.
• Starring Martin Freeman and Adam Brody.

📈 Planet of the Apps (Apple TV, 2017)

• A reality show where mobile app developers compete for investment.
• Will.i.am, Gwyneth Paltrow, and Gary Vaynerchuk were also featured as mentors/investors.
• It was cancelled after one season.

🧠 The Pitch (podcast, USA)

• An audio-based “Shark Tank” where startups pitch live to investors.
• More honest, less showmanship, more real business decisions.

Is startup a tricky investment?

It's a bit difficult to define the above concept, but "tricky investment" is an unofficial term in the startup world, but it usually refers to investments that appear favorable on the surface, but behind the scenes, they hide conditions that could be detrimental to the startup (or other owners) in the long run.

🔍 Typical “tricky” elements in startup investments:

(I.e. Too low rating

The angel or VC gets in at an unrealistically low value, thus acquiring too large a stake, which demotivates the founders or makes subsequent rounds impossible.

(I.e. Preferred shares (liquidation preference)

This is a standard condition, but if it is extreme (e.g. 2–3x refund right), it can practically "zero out" the founders during an exit and you won't necessarily know about it. It's worth asking the founders if they have one.

⛔ Protections against share dilution

The investor is protected against future devaluation when additional shares are issued, but if this is too aggressive, everyone else loses significantly on their stake. This has happened to me several times, fortunately crowdfunding platforms almost always give you the opportunity to contribute additional capital so that your stake does not change.

🧨 Buyback right

The investor stipulates that in certain cases he can return his share at a fixed price, for example, if the exit does not occur within X months. I have not encountered anything like this yet, but it is theoretically possible.

💼 Forced exit rights (drag-along, tag-along)

These can be useful, but if they grant excessive rights to only one side, the interests of the other side will be harmed.

🤔 Why would a startup undertake this?

• Money is needed, and there is no better offer. It was quite typical in 2024 that there was 1 offer, on a “must have, don’t have” basis, because of this, there were cases where the valuation fell by a third, while the revenue increased by four times! This is a typical value disparity, the question is, was the higher valuation the exaggerated one or the new one very low? This is why you have to understand startups too.
• Due to inexperience, they fail to see the long-term consequences.
• The investor “seems friendly,” but the contract is not.

Legal and liability statement (aka. disclaimer): my articles contain personal opinions, I write them solely for my own entertainment and that of my readers. The articles published here do NOT in any way exhaust the scope of investment advice. I have never intended, do not intend, and am unlikely to provide such advice in the future. What is written here is for informational purposes only and should NOT be construed as an offer. The expression of opinion is not