How to invest in startups?

Investing in startups can be a good way to keep your business current and help the economy grow.

Every modern company must keep an eye on new growth opportunities and possibilities for innovation in the market.

However, despite having resources and structures, some corporate organizations may have difficulty promoting these internal changes.

Therefore, investing in startups is something that is currently very sought after . In addition to helping with business modernization, this practice can mean the generation of new revenue and business for companies of all sizes.

Not to mention that this practice also contributes to the development of a more diverse and receptive market for promising initiatives and disruptive ideas.

Even so, many corporations avoid this type of investment due to the lack of information and expertise in this growing market.

Therefore, we prepared an article explaining a little more about how and why to invest in startups.

Check more below!

Why should your company invest in startups?

In a market that becomes increasingly competitive, it is important to be aware of the various opportunities and trends brought by technology.

Therefore, it is interesting to encourage the development of promising initiatives and projects.

More than just providing resources and structures, traditional companies can serve as facilitators for the growth of innovative professionals who can seek new solutions through their ideas.

Established companies can benefit from investing in startups for several reasons. See some examples in the list below.

1. Innovation and technology

First, it is worth mentioning that startups are often at the forefront of innovation and can even develop disruptive technologies .

By investing in startups, established companies can access new ideas, creative solutions and emerging technologies that can boost their own growth and competitiveness.

Combining the freshness and dynamics of new professionals with the expertise and structure of established companies, it is possible to promote a valuable collaboration that will help the growth of both sides of this partnership.

2. Access to new markets and segments

Often, startups focus on niche markets or specific segments.

Investing in startups that operate in complementary areas or in markets not explored by the consolidated company means expanding the customer base and diversifying the business.

Generating new connections is very important these days. Even more so as we are going through a moment of generational transition where the majority of the consumer public will be made up of digital natives.

Knowing how to dialogue with this new and demanding audience is essential for companies that wish to remain relevant over the coming years.

3. Agility and flexibility

Startup projects are also known for their agility and ability to quickly adapt to market changes.

With such a partnership, established companies can acquire this agile and flexible mindset.

By leveraging startups’ ability to test new ideas, implement changes quickly, and adopt innovative approaches to problem solving, corporations can be better prepared for new market challenges.

4. Talent attraction

Generally, startups are attractive environments for talented and ambitious professionals.

Despite being a medium closely associated with technology, the startup ecosystem is a fertile field for the development of high-quality professionals. Human resources make all the difference in this context.

Deciding to invest in startups allows established companies to establish strategic partnerships, acquire stakes or even completely acquire promising startups.

The result of this can help attract and retain qualified talent who want to work in an environment of high energy and accelerated growth potential.

5. Learning and collaboration

Last but not least, we can say that collaboration between established companies and startups can generate a valuable exchange of knowledge .

After all , startups bring with them an entrepreneurial mindset , experience in innovative strategies and new ways of approaching problems.

In turn, established companies can share their experience in large-scale operations, industry knowledge and resources.

This mutual collaboration can generate learning and drive innovation on both sides.

However, it is important to emphasize that investing in startups, as in any other project, also involves risks.

Not all startups will be successful, careful investment management is needed to maximize the return potential.

In addition, it is essential to establish a clear strategy aligned with the company’s objectives when investing in startups, to ensure that applications are made in a judicious and strategic way.

More than finding the most disruptive initiative, you need to understand which project best fits your company’s needs. Often, an incremental innovation is all your company needs to modernize definitively.

Therefore, before looking for solutions, it is necessary to be precise when identifying the problems to be solved.

What are the main ways to invest in startups?

Once your research is done and you want to move on to the next step, you need to choose a business model for your partnership.

There are several ways to invest in startups . Here are some of the top options

1. Direct investment

Direct investment is a more traditional way of making financial investments in promising initiatives.

In this model, a consolidated company invests directly in a startup, acquiring an equity stake.

This practice can be done through a financing round, in which the investing company provides capital to the startup in exchange for a percentage of the project’s shares.

2. Venture capital funds

Another alternative is venture capital. This is a type of investment made by funds specialized in startups.

In summary, venture capital is a form of investment in which investors provide capital to startups and early-stage companies with growth potential, in exchange for equity participation, aiming to obtain a significant financial return in the future.

In this business model, traditional companies can invest in funds as shareholders, allowing fund managers to make investment decisions in startups .

3. Accelerators and incubators

Accelerators and incubators are organizations that provide support and resources for early-stage startups. Closely linked to university culture, these initiatives are also interesting ways to encourage promising projects.

In this case, investing companies can establish partnerships with these organizations, investing in startups selected by them and benefiting from the innovation and networking environment provided by these communities.

4. Strategic partnerships

Consolidated companies can establish strategic partnerships with startups , where both sides benefit from the collaboration.

These partnerships may involve sharing knowledge, accessing resources, distributing joint products or services, and co-creation opportunities.

5. Open innovation

Finally, we will talk about the subject that we are authorities on here at 100Open, open innovation .

Open innovation involves establishing collaborations with startups and other external actors to drive innovation within established companies.

What can include:

• research and development partnerships;
• internal acceleration programs;
• hackathons;
• innovation fairs;
• access to new markets
• access to public and private initiatives

Open innovation allows established companies to benefit from the creativity and expertise of startups, promoting internal transformation.

Open innovation is considered one of the best ways to invest in startups because of the benefits it offers.

First, this business model allows companies to access a wide range of ideas and creative solutions coming from startups.

By establishing strategic partnerships, these corporations can leverage the specialized knowledge and entrepreneurial mindset of startups to drive innovation in their processes , promoting adaptability and organizational agility.

Second , open innovation provides an environment conducive to collaboration and resource sharing.

Startups often have complementary skills and technologies to established companies, allowing both to benefit from each other.

Through strategic partnerships, established companies can provide financial resources , industry expertise and an established customer base, while startups offer innovation, technological expertise and operational flexibility.

This collaboration results in significant synergies, allowing consolidated companies to diversify their offerings, access new markets and accelerate the development of innovative solutions .

However, it is important to point out that open innovation also requires a strategic and careful approach.

It is necessary to establish proper selection, evaluation and partnership management processes to ensure that investments in startups are made effectively and in line with your company’s objectives.

Of course, this is a time-consuming process, which requires a lot of study and research time. That’s why we at 100Open have developed a project that helps identify and validate startups.