When the business model of an internet startup fails to generate any traction, investors are often forced to turn to the public markets to raise funds.
But if a startup’s idea fails to grow, investors can still choose to take on its risk by funding the venture.
For this reason, it’s a risky strategy to go public with a startup and hope it does well, said Seth Lips, founder and chief executive of StartupHub, a public-private investment firm that has worked with a few of these startups.
“You’re taking a risk,” Lips said.
“The best risk-reward strategy is to go with the best idea and not to go through the pain of raising funds from a venture capitalist.”
The best way to avoid the risk of funding a startup with a risky business model is to create a startup that is well-managed, Lips added.
He added that the best startups also have a way to scale and expand their business and generate revenue.
The key to success is to keep the core values of the business high and invest in the best technologies and technology services, he said.
The startup has a great track record of success, according to Lips and other investors.
For example, his company invested in Lyft, a ride-hailing company that has grown to become one of the most popular ridesharing companies in the country.
The company has raised $1.7 billion and has more than 50,000 employees.
It also has a good track record for operating without any debt.
That means it is not required to pay taxes on its profits.
Lips has also invested in the online education giant Udacity, which was recently valued at $1 billion.
His company invested more than $5 million in the company, and in February it announced it had acquired the startup.
It said the company will be focused on growing Udacity’s educational offerings.
The good news is that the company has more options for investors to invest, said Lips.
He noted that it has invested in Uber and Airbnb.
But his firm has not invested in any other venture capital firm, he added.
The downside to investing in a company that fails is that it might get a lot of money, Licks said.
That could be a problem if investors don’t like the way the company does business.
“If they’re not impressed with the business plan and the team, they might want to avoid investing,” Licks explained.
Another risk is that investors might think the company is too big and expensive to succeed.
That’s because the founders and board of the company have little or no experience in running a venture, Lamps said.
There is also the risk that the public market will be too slow to respond.
That is because the company might have to rely on its private market to raise capital.
“What if people don’t believe in the idea, or they don’t see the business as viable?
They might just leave?”
For some startups, it might be easier to invest from the public marketplace, as they are less risky, he explained.
For others, it may be more difficult to find investors.
If a startup fails, investors should consider raising capital elsewhere, he recommended.
“There are companies that have done well, and those companies have been successful because of their private markets,” Laps said.