We get it, you’re a new investor and are looking to put your money into assets that give multiplied results over time.
Usually, private and public markets are the two avenues for any investor, which make up the entire financial landscape of investing.
While private companies are funded by institutional investors and VCs, publicly-traded companies raise capital either through common people or on the stock market.
In 2021 alone, private equity investors in India raised nearly $30 billion, with sectors like IT, healthcare and finance being major contributors.
So what is the difference between investing in startups and on the stock market?
Let’s find out.
The difference between private sector and startup investments
Most companies begin their journey by doing business in the private sector. A good example of this would be Google, the search engine giant founded by Larry Page and Sergey Brin in 1998.
As its history goes, both the founders collected nearly $1 million in seed funding from friends, family and other small investors during its early days.
The company then went public in 2004. As of 2021, Google’s valuation stood at a whopping $520 billion, making it one of the top tech conglomerates globally.
In the private market, companies mostly receive funding from VCs, institutional investors and private equity firms among others.
The aforementioned parties usually assess a startup’s vision, product and approach towards a market. In India, private sector companies face minimal restrictions by governing bodies (SEBI).
Moreover, they don’t have to disclose their finances to the public.
Interestingly, Jeff Bezos – who invested $250,000 in Google as seed money, received a massive $280 million during its IPO.
The private market has a high-risk, high-reward nature.
It is no wonder then, that startup investing has become hugely popular among new investors.
At Captabl, we help you participate in this opportunity starting for ₹20,000.
The Public Market
The public market involves selling a company’s shares to the public, who then trade on these securities in the stock market.
The stock market is a centralized platform/location where investors can buy and sell ownership of companies.
The public market is open for all, with easy access and credit flow. It also involves a close analysis of all market fluctuations.
Businesses are accountable to their investors, which is why SEBI has put together certain rules that all publicly-traded companies must follow.
They also have to disclose their finances to the public.
Startups vs. Stocks: Which is better?
Both the public and private sectors have their own risk and reward. While the public market undergoes extensive fluctuation, the private sector (especially startups) have a tremendous failure rate.
To answer your question, it depends.
Success in either market is dependent on the market conditions, company growth and the investor’s risk appetite.
So this was all about the differences between investing in startups and putting money into stocks.
Based on your risk appetite and long-term financial goals, you can choose the one that suits you.