What Will Happen To Startup Investing In 2025?

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Wouldn't it be great if you could foresee the future of investing for startups? We introduce you to the finance and banking trends of 2025. Check them out!

Amazon and Best Buy are setting up shop for crowdfunded products as we speak. The FED has finally approved some sort of crowdfunding law. On top of that, Kickstarter and Indiegogo are establishing a presence in Europe.

New ways of financing are rewiring the early stage environment. Meanwhile, startups and large corporations alike are making use of these instruments for marketing, finance, traction, user engagement and many other purposes conceived by the human mind.

Just a decade ago, the path to early stage funding was pretty much fixed and strongly controlled by a handful of players. Today, the excitement is palpable, the game has changed and early stage entrepreneurs are faced with a myriad of choices. While the presence of choice is almost always a good thing, certain trends are starting to get noticed by those sitting on the other side of the table, namely capital providers.
About a month ago James P. Gorman, CEO of Morgan Stanley, announced that their toughest competition is coming from the valley. Meanwhile in Europe, more and more banks are taking steps towards alternative financing.

So capital providers know something’s stirring. But do you know the main trends that shape how capital providers are performing with their businesses?

Trend #1: Payments

Payments – of course – are the backbone of investing. Without internationally low transaction costs, investing small amounts is simply not profitable. Luckily, many startups are tackling this problem (Transferwise, among others). On top of that, blockchain and the bitcoin network are still there and they continue to provoke a rethinking of the global payment infrastructure.

In 2025

Most money transfers at a global scale will be almost free of charge, liberating small investments from the constraints of transaction costs.

Trend #2: Financial Information

The world needs more harmonious accounting and financial reporting in order to move forward. The EU is harmonizing its accounting systems to IFRS, which more resembles the US GAAP compared to previous national accounting practices.
On top of that, more and more countries are adopting easy to use (and sometimes free) APIs for financial information of private and public companies. In the UK, this is put to a good use by companies like companycheck.

In 2025

Global availability and comparability of financial information will be a default. Analysis of past competitor data, powered by big data analytics, will allow business owners to benchmark their information against competitors based on accounting data.

Trend 3#: Liquidity

Liquidity, in the sense of money to be invested (and divested) from any kind of company, is surging already. More and more companies remain private longer in what seems like a trend to larger private rounds, or more liquidity in private “stock” that delays the need for IPOs. On top of that, companies like eShares are making the whole process easier from a legal and financial standpoint.

In 2025

Will buying and selling shares be as easy as ordering food online? Probably, and why shouldn’t it be? Liquidity for private companies means more competition, more access to financing when and where there are growth opportunities and easier, faster and “safer” returns for capital providers.
What does all this mean for standard capital providers?

It is unlikely that these trends will bring every individual into private company investing. Most people do not have the knowledge, the means or the risk bearing capabilities to invest in high-risk, high-return ventures. However, it is probable that a large chunk of private companies are going to have a liquid market for their shares. Their ownership, or at least part of it, will be available to investors.

New Ways For Banking

The banking role has always been to perform superior due diligence and allocate assets to the best opportunities. However, as information and analytics become ubiquitous, more of the same analytics capabilities will be in the hands of other investment corporations and individuals. Yet, the deep knowledge and networks of banks will continue to be a unique advantage, likely leading to specialized banks.

New Ways For Venture Capital

The case for venture capital is becoming less strong as the years pass. This can be seen through lower performance, management fees and the spread of corporate venture capital and corporate investments. Recently, VCs have been creating SPVs for larger specialized rounds. This is in line with the trends above, as information is widespread but access to deals is not. A VC can facilitate transactions and give access to them without withholding all the power of the investing to itself. More specialized and smaller VCs will likely become more common as investments grow smaller and access to deals becomes more widespread. With more information and liquidity, algotrading could also move from public to private markets.

The investment market is about to be completely altered by the online revolution. As startups attack different pieces of the puzzle, it is easy to see how position rents will diminish in the next 10 years. It is going to be worth watching, especially considering that improved liquidity and asset allocation will allow for even faster innovation and growth of private companies.

 

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