In a recent interview with Pathfinder CEO Alexander Kvamme, it was stated that recruiting and financing are among the “universal challenges” people face when starting companies. This is a good way to put it, and should put you at ease if you’re looking into launching a business and struggling to find the money. Just about everyone who has ever started a company sees financing as a challenge. So in this post we’re following up with a few words on one of the ways in which you can look to fund your startup: investment.
To be perfectly clear, this is a somewhat unorthodox concept. Most entrepreneurs will look to help from friends and family, bank loads, angel investors, or even crowdfunding as ways to fund their businesses. These can be more low-risk strategies that can help significantly in the early going. Some, however, will consider the alternative practice of personal investment as a means of raising money to start a business. As with any investment, there’s some risk to this idea. But the upside is that if it works, it leaves the business free of debt and obligation to lenders or investors.
With that in mind, the following are some of the strategic investment methods startup founders might consider — some of which can yield meaningful returns even in a matter of just a few months.
Mutual funds are very popular options for people who would rather have experts trade their money. They consist of various sums contributed by different investors, but are traded as lump funds managed by experienced professionals. And they make some sense for prospective startup founders for a couple of reasons. One is that professional management leaves you free to focus on your business while the money you hope to fund it with is grown for you. The other is that the best-performing mutual funds tend to yield about 30% a year (meaning for every $100 in you can hope to get back $130 in a year). That’s a fairly respectable return for little effort. It means that if you put money away early — say, when you’re just deciding you want to try to start your business — you can have fairly significant financing by the time you’re ready to launch.
High-Yield Savings Accounts
Savings accounts tend to yield more modest returns, and would not typically be recommended as a way of raising funds in the short term. However, there are various types of high-yield savings accounts that will offer greater interest, usually with a few simple conditions (such as leaving money in the account for a set amount of time). Opening a number of different high-yield accounts — again, early on when you’ve just decided to go for it — can land you with a respectable return in time, and make it easier to deal with those early startup costs.
Trading stocks to fund a startup is a tricky prospect. It’s demanding on your time, and it’s difficult to do well without experience. However, CFD stock trading is a different process that can be somewhat more useful to an entrepreneur. Standing for “contract for difference,” a CFD trade is basically a funded prediction rather than the purchase of a stock. It’s a contract stipulating that you expect a stock’s share price to movie in a certain direction in a certain time span. In that sense, it’s an investment that can offer similar returns to stock trading, but which requires little attention following initial decisions.
Trading on stock futures is much like trading CFDs, in terms of its potential benefits for startup founders. It’s more about initial decisions than active trading, and it can yield strong returns if done correctly. In this case though, rather than betting on share price direction, you’re agreeing to buy a stock at a set price after a given amount of time — such that if the actual price is higher by that time, you’re essentially getting a valuable asset at a discount (which you can then sell for a profit). It’s perhaps somewhat more involved than CFD arrangements, but still less so than regular stock trading.
Commodity trading works much like stock trading, but tends to be at least somewhat more relaxed. It’s not uncommon to hold positions for a longer period of time, meaning it’s conceivable that would-be startup founders can buy assets for a few months at a time in the hopes of earning meaningful returns. Gold is perhaps the commodity that first comes to mind for many, and sentiments are bullish on the precious metal of late, as it’s shown in 2020 just how valuable it can be. But traders might also look into silver, crude oil, various agricultural resources, or even cryptocurrencies. They all carry risk, but they can yield returns in just a few months’ time when investments go well.
Once again, these are somewhat unorthodox financing ideas. They’re not for everybody, and they require careful attention if they’re to work. But given how many people struggle to fund their startups, all options should be considered. In some cases, these investment methods can produce the money that’s needed to get an idea off the ground.
Author: Benjamin Cole
Statements of the author and the interviewee do not necessarily represent the editors and the publisher opinion again.