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Startups | Why student startups generate great value for investors?

According to NACUE three quarters of young people would like to run their own business. Similarly, the biggest concern to almost all of them is being able to fund their project. Banks don’t want to lend to businesses, particularly those that are run by younger people. The government startup loans are a good step, but with mounting tuition fees, students don’t want to be potentially liable years down the line. This is a real problem. Equity provides a solution, though sourcing investors is still tricky. Up and Funding provides the following reasons why student startups can be a great bet for any investor’s portfolio and has the potential to generate the most value:

1. Lower valuation startups:

Young people are far more likely to give a realistic valuation. They know theydon’t have the track record of someone and the price will reflect this. While obviously a young person could be more of a risk, the potential upside is clear.

2. Money going where it is supposed to:

Speaking to many Angel Investors the story is always the same. Lots of the time funding is sought simply to keep the Directors in a manner they are accustomed to, on a salary similar to what they were paid before. Student startups rarely if ever pay themselves unless their company has started to make money. You can be sure that your browser investment is properly utilised.

3. Student startups have Low overheads:

In addition to the salary aspect mentioned earlier, by there very nature student startups are built from the bottom up. Many businesses start with high sunk costs of office space in a prime location with utility bills and are spendthrift. Student startups by their very nature are bottom up (think Facebook was created in a university dorm). Many universities also provide excellent ‘enterprise hubs’, effectively free office space with all the services a startup could need.

4. Access to fantastic, inexpensive and talented students:

University campuses are full of the brightest sparks in the country. We already have many examples of unpaid internships. While we never would advocate unpaid work, imagine the costs relative to hiring experience through a recruitment agency to accessing flexible students, even more so if it’s an idea they would really want to get involved in.

5. Social enterprise aspect:

Investing in startups is not all about the bottom line return, most angel investors cite the immensely rewarding nature of investing in people as well as businesses.

6. Tax Breaks for startups:

While this is not exclusive to student startups, investors seem to be generally unaware of the tax breaks open to them. Through the government’s Seed Enterprise Investment Scheme (SEIS), investors can claim up to 78% of their initial investment back, and even more if the company defaults. With this scheme, startup investing isn’t the risk that it used to be!

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