Why it’s a good time to be a founder in a startup or investor in alternative assets.
Investors that continue to lose money in the public markets are now putting more capital in alternative investments such as startups and real estate due to a higher risk/reward profile than the volatility of the public markets. With traditional investment vehicles like stocks and bonds becoming too volatile to predict for many investors, they need to look elsewhere for opportunities with better/higher returns.
Startups can be a hedge against inflation. As an alternative investment, they have high growth potential but also high risk attached, since there is no track record or history of success (yet). Many tech models could be successful or fail completely depending on how well their product fits into the market at any given time, or other factors including the founder and their resiliency to stay committed.
If a startup makes it, each person involved stands to gain significantly from their stake in the early-stage company.
Over the upcoming next few years, there will be a lot of opportunities for distressed real estate assets, as well as assets with favorable cap rates in the middle market. Look for light industrial and smaller multi-family properties where there are opportunities for investors to take on the debt of these properties and make a return on the difference between what was owed and what they can be re-financed for.
Investing in real estate is not for everyone, but for those who do, it’s a great way to diversify their portfolios while still maintaining liquidity when needed, so although not necessarily an “alternative” it’s still an important asset class to consider.
When looking at the above examples of alternative assets, it’s important to remember that they’re not mutually exclusive. Many investors and family offices will use various types of alternatives in their portfolios as a way to diversify their assets while also providing some liquidity in case they need it.
One of the biggest opportunities in real estate is to invest in assets that have the potential to be converted into something else. I’m not talking about a quick fix and flip necessarily, but rather taking advantage of a changing market and buying undervalued assets that can be updated, brought up to code, rezoned for higher density, or sold off for redevelopment.
It’s important to remember though that any investment strategy should be based on your own risk profile and financial goals rather than what everyone else is doing or saying they’re doing.
The bottom line is that investors are looking more at alternative investments to fill the void created by the uncertainty of the volatile market.
We’re seeing more people wanting to invest in startups, real estate, and other alternative assets than ever before.
Benjamin Douglas Ray