How do startups make money, and why can’t you invest in them?


If you wanted to buy stock in Apple ($AAPL), Google ($GOOGL), or Amazon ($AMZN) right now, you simply need to get in touch with your broker or brokerage and give them money. Within seconds, you’ll become the proud owner of shares in your company of choice.

If you wanted to purchase shares of newer companies like Grubhub, Slack, and Uber, you can’t. These are privately owned startups that don’t trade on any stock exchange. They might make money like most publicly traded businesses, but they’re still young companies who haven’t taken the big leap into going public.

That doesn’t mean these companies don’t sell shares of their stock. In fact, selling small percentages of their company is often the only way they’re able to exist in the first place. Whereas anyone can invest in a publicly traded company, only specialized and often wealthy investors can buy into a startup.

If this sounds a tad confusing to you, don’t fret. Understanding the intricate and confounding world of startup investments and venture capital is easier than ever thanks to a video from the folks at Wall Street Survivor. Once you watch it and learn the ins and outs of the industry, you might aspire to become a startup investor yourself!

Why do venture capitalists take a chance on startups? If the startup takes off, their original investment will become worth significantly more in the end, especially if that company becomes publicly traded on the stock market. For instance, a private school that originally invested $15,000 into Snapchat made tens of millions when Snap Inc. recently went public. Not all startups are successful, though. In fact, many of them fail, and the original million-dollar investments are eventually worth nothing. Taking a chance to make millions or billions, however, is well worth the risk.


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