Digital platforms have also brought unlisted companies to retail investors in a whole new way. However, investing in them has its commercial benchmarks, which, for example, do not exist when investing in listed companies.
Investing in unlisted companies can add a good spice to your investment portfolio. Owners of growth companies also get into the story of the company in a completely different way.
We’ve collected five rules of thumb to keep in mind when making investments.
- Understand long-term opportunities
Many growth companies are loss-making, so the company’s valuation is based on long-term potential. Don’t just stare at last year’s results, but explore the company’s plans for how the business will turn profitable. Think about how the company’s operating environment will develop in five or ten years, for example. How does it affect a company’s growth potential?
- Be aware of the risks
Everything investing involves risk, as well as investing in growth companies. Do not invest in a company that you do not understand. Remember that an investment can tie up your capital for up to years. You may not be able to convert your investment into cash as easily as with listed companies. Turning an investment into cash may require, for example, the sale of a company or listing on a stock exchange.
- Follow megatrends
Urbanization, climate change, environmental awareness… The world is currently experiencing several forces for change that affect businesses and investment. Think about what kind of problem your potential investment will solve and what factors will drive the company’s demand. A growth company that hits the right seam can grow into a major global player.
- To fan – but not just be fan
Many of us “fan” well-known growth companies – often for good reason! Fanatic, however, cannot be an investment criterion, although it can be one of the factors driving investment in a company. You should carefully read the company’s strategy and key figures before making an investment decision.
- Enjoy the ride!
Investing in growth companies is much more interesting than investing in listed companies, as investors get into the company’s story at an early stage.