Before consolidating, companies go through different stages. In the first stage or seed, the projects are full of the enthusiasm and innovation of their creators, which makes them potential companies. However, having a great idea and enthusiasm does not guarantee the survival of a venture. The main obstacle faced by early-stage companies is a lack of capital.
An early stage company is looking to consolidate its business and to hire its first employees. However, its sales are usually low and profitability is not yet consolidated, a situation that often makes it difficult to be sure of survival. Hence Seed capital is one of the main investment alternatives for ventures that need to achieve stability and consolidate in their market.
During the first quarter of 2022, investments in seed capital for early-stage companies reached a value of 10.3 billion dollars worldwide, according to Statista data
Benefits of investing in early-stage companies
Early-stage companies are attractive to investors as they are innovative projects and have great potential to position themselves in their market. In addition, their business models are scalable and profitable, depending on the sector to which they belong. In these qualities lie the benefits of investing in the early stage of a company.
In addition, supporting the development, growth and consolidation of enterprises is essential for the diversification of the country's economy and the generation of formal jobs. Which makes it a virtuous circle that benefits everyone.
New companies often start operations with the savings of their creators and with the support of family and friends. Similarly, angel investors and equity funds that invest through seed capital are essential during the early stage of a company.
On the other hand, business accelerators offer services that help during the process of consolidating a company at an early stage with mentoring, networking and specialized advice in different areas that give entrepreneurs the boost they need.
Investing in an early stage company has different benefits:
- They are innovative
The competition in the different markets is great. Entrepreneurs seek an innovative differentiator for their project that allows it to stand out from the rest and provide a solution to market demand.
- Potential to become a benchmark in its market
Each new company has the potential to become a benchmark in its industry. If your business model has a stable and well-run foundation, early-stage companies have a great chance of positioning themselves above the competition, depending on their sector.
- Scalable and profitable business model
Being part of a company with a business model with these qualities is one of the main benefits; not only in the economic question, but also in the opportunity that represents for investors to be part of a company in an early and disruptive stage.
Sectors with the greatest potential in early-stage companies
Startups that belong to the technology-related sectors are the main options for investors looking to help early-stage companies. In addition, the social restrictions imposed by the Covid-19 pandemic were a key factor in boosting these sectors, since they offered options to cope with the crisis.
Funds like H20 Capital took the opportunity and created a second fund with up to 65 million dollars, focused on the Latin American region. With which they will invest in early-stage companies.
The growth of the software industry is not new and although the pandemic caused a slight drop in the market, development expectations in the sector are very optimistic. The response to the demand for solutions for the new remote life; In addition to serving other sectors such as hotels, retail, communications, construction, among others, it is what makes this sector one of the most profitable for investment.
You can also read: Software industry, key in the digital economy
Marketplaces have been able to maintain the enormous popularity they have gained since they appeared 20 years ago, becoming the link between customers and suppliers through a unique online platform where everything the customer needs can be found. Based on monthly visits as of April 2021, statista lists the world's leading marketplaces:
- Free market
The pandemic accelerated and boosted the growth of e-commerce by offering people a solution to make purchases from home and sellers the opportunity to continue selling online. Early-stage companies that focus their business model on ecommerce are the main alternatives for investment. Ecommerce sales in Latin America registered a value of 68,000 million dollars in 2020 and it is estimated that by 2025 the figure could reach 160,000 million dollars, according to Statista data
Technology is part of our daily life for that reason it is one of the main economic engines worldwide. In addition, to improve our living conditions and provide new and better work options; It forms part of and supports the growth and development of other sectors. The ventures that seek to be part of the IT sector will be great opportunities for those who invest in them. It is expected that by 2022 the growth of the technology sector will be 9.4%, in Latin America, according to the International Data Corporation Latin America Latinoamérica (IDC).
The use and application of artificial intelligence (AI) has been of great help for the automation of processes, the analysis and resolution of problems. The implementation of AI has transformed various sectors; for example, financial, marketing or health, to name a few. The global AI market is forecast to grow rapidly in the coming years, reaching more than $500 billion by 2023, according to Statista data
You can also read: Applications of artificial intelligence that impact the market
Big data positively impacts the development of companies that use it. Industries like marketing, financial services, energy, and consumer goods, to name a few, are taking advantage of all the opportunities that data analytics has to offer. Early-stage companies that use Big Data to correctly process their information will be the ones that gain the most visibility among investors.
Investing in companies in early stages is essential for the growth and development of the country's economy. Supporting entrepreneurs in the early stages of their projects is essential for job creation and ensuring the permanence of companies.
At WORTEV CAPITAL our objective is to promote the growth and development of Mexican companies in early stages and generate an ecosystem that positively impacts investors and entrepreneurs.
Our innovative model allows investors to obtain returns of 24% per year and to entrepreneurs the support to consolidate their company.