Investing in start-ups: A guide to successful start-ups

Start-ups are at the heart of innovation and economic development. For investors, they represent a unique opportunity to diversify their portfolios while gaining access to attractive potential returns. However, investing in these young companies entails risks of capital loss. Successful investment requires careful evaluation of projects and consideration of the challenges specific to each sector.

Investing in a start-up can be a strategic decision for diversifying your investment portfolio. These companies with high growth potential are increasingly attracting investors. By supporting these projects from the outset, you can benefit from substantial returns if the start-up succeeds in developing.

The advantages of investing in start-ups include :

• The potential for high returns : Start-ups can develop rapidly, offering opportunities for significant gains.

• Portfolio diversification: Investments in start-ups can complement other types of investment, such as investment PME.

• A positive impact: Investing in an innovative and responsible project allows you to contribute to the economy and society while making a financial profit.

Investing in a start-up requires a methodical approach and sound risk management. Here are a few steps you can take to get started in the world of start-ups.

Choose the sector

Certain sectors are particularly attractive for investing in start-ups, such as digital technologies, healthcare or renewable energies. These areas are experiencing strong growth and offer opportunities linked to innovation.

Assessing the risks

Investing in a start-up involves significant risks. An in-depth analysis of the company's risks and prospects is therefore essential. In particular, you can analyse :

• The viability of the start-up's business model.

• The background and skills of the founding team.

• The soundness of the business plan and financial projections.

• The competitive environment and market trends.

In addition, it is essential to consult financial experts to better understand the particularities of the projects in which you wish to invest.

Diversifying your investments

Diversifying your investments across several start-ups and sectors reduces the risks associated with the potential failure of a project. It can be a good idea to spread the amounts you invest and look at companies at different stages of development, from young start-ups to more established start-ups. This strategy makes it possible to take advantage of a variety of opportunities while limiting the impact of any unforeseen events.

Supporting sustainable projects

Investing responsibly is a growing trend. Many investors are looking to support start-ups that have a positive impact on the environment, society and governance (ESG). Before investing, make sure that the start-up you are targeting meets ethical and responsible criteria.

Invest online

Investing online is a practical and flexible way of financing start-ups. Thanks to digital platforms, you can diversify your portfolio by investing in innovative companies, and regularly monitor the progress of your investments. This method allows investors to make informed decisions and quickly adjust their strategy in line with developments in the companies they support.

Monitoring and managing your investment

Once the investment has been made, it is crucial to monitor the start-up's progress on a regular basis. This will enable you to assess the results and make informed decisions about your investment. You may need to reinvest or adjust your strategy depending on the company's performance.

There are several types of investment in start-ups, each offering different levels of profitability and risk.

Investing via private equity

Private equity is a way of investing in start-ups by providing funds in exchange for shares in the company. This type of investment can offer attractive returns over the long term, but carries a high level of risk, as the success of start-ups is never guaranteed and can take time. Eurazeo, a specialist in private equity, offers individual investors funds dedicated to supporting start-ups and growth companies.

Investing in start-ups via life insurance

Some life insurance policies allow you to invest in private equity funds or specialist vehicles that finance start-ups. This approach allows you to diversify your portfolio while benefiting from the tax advantages of life insurance and its flexible management. In this way, you can diversify your investments, with a degree of capital protection and professional monitoring.

Investing in private debt

Investing in private debt enables you to finance start-ups through loans at attractive rates. This can be an alternative to equity investment for investors looking for fixed returns and lower risk. However, this investment method requires precise monitoring of the start-up's cash flows and financial commitments.

Investing via crowdfunding

Crowdfunding allows investors to participate in the financing of start-ups in exchange for shares in the company or other types of remuneration. This type of investment is accessible to a wide audience and allows you to support innovative projects while benefiting from the potential for attractive returns. However, it is important to note that these funds can carry a risk of capital loss, especially if the companies financed fail.

Investing in start-ups involves specific risks that it is essential to consider before taking the plunge. These young, innovative companies can offer high returns, but they also present significant volatility and uncertainty. Here are the main risks you may face:

• Business failure: A start-up may fail, despite its growth potential, due to management problems, an inadequate business model or a poor strategy.

• Lack of liquidity: Unlike listed shares, investments in start-ups are often illiquid, meaning that it may be difficult to sell your stake for a number of years.

• High volatility: The value of a start-up can fluctuate significantly, influenced by internal factors (management, product, team) or external factors (competition, regulation).

• Risk of dilution: If the company raises new funds, your stake in the company could be diluted, reducing your influence and your share of the capital.

• Regulatory risk: Start-ups, particularly in innovative sectors such as technology or healthcare, may face changes in regulations that affect their development, profitability or even viability.

Investing in start-ups can offer tax advantages, depending on the schemes in place. It is possible to benefit from a reduction in income tax by investing in innovative companies or SMEs. Start-ups dedicated to research and innovation can benefit from the Research Tax Credit (CIR), which can contribute to the solidity and sustainability of their project. In addition, capital gains tax exemptions may be available under certain conditions, particularly if the investment is maintained for a minimum period. It is advisable to find out about the schemes in force to optimise these tax benefits.

This article was produced by Eurazeo Global Investor for information purposes only. It should not be construed as a solicitation or offer relating to financial products or as legal, tax, financial or any other kind of advice. Readers are invited to contact their own advisors for any analysis relating to the content of this article. The information presented does not claim to be exhaustive. Accordingly, this document alone should not be relied upon in making an investment decision. Please refer to the legal documentation of the funds mentioned before making any final investment decision.

Past performance is not necessarily indicative, nor a guarantee of future results. Information on past investments is provided solely to illustrate the nature of these investments and the related investment strategy and process. There can be no guarantee that the investments made by the funds will produce comparable results, or that the targeted returns will be achieved. Investing in private equity/private debt funds involves a risk of loss of capital and illiquidity.