Why startups deserve a place in your portfolio: A comparison with other asset classes

For today’s investors, the opportunity set has never been broader, or more complex. 

Traditional assets, such as stocks, bonds, and real estate, remain core components of most portfolios; however, the rise of startup investing has gained popularity among investors and added a new complex dimension to the mix. Once limited to institutional players and Silicon Valley insiders, venture capital, syndicate investing, and crowdfunding are now accessible to retail investors. 

In this article, we explore how startup investments compare to other major asset classes in terms of risk, liquidity, access, return potential, and time horizon. You'll find clear explanations of each option, from venture capital funds to public stocks, alongside a side-by-side comparison table to help you evaluate how each investment type aligns with your goals.

Startup investments as an asset class 

Startup investments are a distinct category within the broader alternative investment space. This asset class includes both direct investments in early-stage companies, commonly referred to as angel investing, and indirect investments made through venture capital funds. As an asset class, it also carries unique characteristics that investors should understand:

‍Long-term timeline: Startup investments generally require a long holding period, typically ranging from 7 to 10 years. This is due to the time it takes for early-stage companies to grow, mature, and reach a liquidity event such as an acquisition or initial public offering (IPO). As a result, startup investments are less susceptible to short-term market fluctuations.

‍Illiquidity: Investments in startups are typically illiquid, meaning they cannot be easily sold or exchanged for cash. Most startup investments are privately held and limit the exit possibilities until a formal liquidity event occurs. However, due to the challenging market conditions we began facing a few years ago, secondary markets have started gaining more traction in the eyes of both investors and founders.

‍High risk and high return potential: The failure rate among startups is high, and many investments may yield little or no return on capital. However, a small percentage of successful startups can generate significant returns, often exceeding those of traditional asset classes. This return distribution tends to follow a power-law model, where a small number of investments create the majority of returns.

Due to these characteristics, startup investing is generally suited for investors with a long-term outlook, a high risk tolerance, and the ability to commit capital for extended periods of time. 

The rise of startup investments as an asset class

Startup investing, primarily through venture capital and angel investing, has moved from the fringes of finance to a highly sought-after asset class. As technology becomes the engine of almost everything in our lives, investors are increasingly drawn to the high-return potential of backing early-stage startups. 

The rise of iconic tech companies like Amazon and Google, which began as small startups funded by private capital, has fueled investor appetite for the “next big thing.” Venture capital, once concentrated in Silicon Valley, has now expanded globally, with vibrant ecosystems emerging across Europe and Asia. Today, venture capital stands on its own within the broader private capital space, offering advantages like long investment horizons, illiquidity, and the potential for outlier returns. 

This is especially true in Europe, where capital invested in startups has increased from $43B during the 2005–2014 period to an estimated $426B from 2015 to 2024, a nearly tenfold increase. 

To put that into perspective, Europe is on track to invest more in startups in a single year now than it did in an entire previous decade.

What makes startup investing particularly exciting, and challenging, is its "power-law" return structure. A small number of startups typically generate the majority of a portfolio’s profits, while many others fail or barely break even. That’s why systematic diversification and access to top-tier deals are important. 

While this asset class isn’t for everyone, its low correlation with traditional investments like stocks and bonds gives it an edge in portfolio strategy. Europe, in particular, has become an emerging VC hotspot, with a growing number of unicorns and “soonicorns” backed by strong public and private support.

‍The main options in startup investments 

Venture capital

Venture capital is a form of investment that involves supporting early-stage, high-growth startups through professionally managed funds. VC funds pool money from accredited investors, institutions, and sometimes family offices, and deploy that capital across a portfolio of startups. These funds are managed by experienced general partners (GPs) who are responsible for sourcing, selecting, and supporting the companies. 

VC investments typically have a long timeline, often 7 to 10 years, and aim for higher returns through exits such as acquisitions or IPOs. The structure allows for diversification within a fund; however, the capital is locked up for years, and the risk of loss is high due to the high startup failure rate.

Access to top-performing funds can also be limited, often requiring existing relationships or a strong track record. Investors considering VC should think long-term, be comfortable with illiquidity, and view the investment as a small but potentially powerful component of a broader portfolio.

‍Syndicate angel investments 

Syndicate investing allows individuals to invest in startups alongside experienced lead investors (often angels, angel networks, or micro-VCs) who source and vet the deals. These syndicates are typically hosted on online platforms like SeedBlink, where accredited investors can back specific deals with relatively small amounts of capital.

Syndicates are structured to allow for passive participation, meaning the lead investor manages the relationship with the startup, handles due diligence, negotiation, and updates. This model provides individuals with access to startup deals they wouldn’t find on their own, accompanied by the benefit of guidance from seasoned operators and investors.

For investors, syndicate investing provides a more flexible and accessible way to build a startup portfolio without the high capital requirements of traditional VC. However, the risks remain high. Startups in syndicates are often at the seed or pre-seed stage, which means the risk of failure is significant. Additionally, since each deal is selected individually, diversification depends on the investor’s commitment to spreading capital across many deals.

Check out our webinar on Tools to scale impact as a lead investor in Europe: Investment syndicates:

Crowdfunding

Crowdfunding enables non-accredited investors to invest in startups with low minimums, such as €500, within the SeedBlink platform through community deals.

Online crowdfunding platforms make startup investing more inclusive by enabling the general public to participate in early-stage deals that were previously reserved for accredited investors. Companies raising funds through crowdfunding typically offer equity, convertible notes, or revenue-sharing agreements, and they may be at the idea stage or in the early growth phase. The platforms offer campaign pages that provide key information, including business plans, financials, and founder videos, to help investors make informed decisions.

‍Read our guide on crowdfunding solutions for tech startups and explore the top European platforms available.

Other major asset classes

Stocks

Stocks are one of the most common and accessible investment options available to the general public. By purchasing shares of publicly traded companies, investors gain ownership in the business and may benefit from capital appreciation and dividends. Stocks can be bought and sold quickly through brokerage platforms, offering high liquidity and flexible entry and exit points. 

For investors, stocks offer a balance between growth and liquidity, making them suitable for both short- and long-term strategies. Investors can choose between individual stocks and diversified options, such as mutual funds and ETFs, which spread risk across multiple companies. However, stock markets are also sensitive to macroeconomic shifts, interest rate fluctuations, and shifts in investor sentiment, leading to potential volatility.

Real Estate

Real estate investing involves the purchase, ownership, and management of property, either residential or commercial. It can provide income through rent and potential appreciation over time, making it a popular option for investors seeking both growth and cash flow. Real estate also offers several tax advantages, including depreciation and the ability to defer capital gains through tax-exempt exchanges.

Unlike stocks, real estate is less liquid and typically requires more hands-on involvement, especially for direct ownership. Entry costs can be high, often requiring tens or hundreds of thousands of dollars, along with financing. 

Bonds

Bonds are fixed-income securities issued by governments, municipalities, or corporations to raise capital. When you invest in a bond, you're essentially lending money to the issuer in exchange for regular interest payments and the return of principal at maturity.

The trade-off for lower risk is typically lower returns, with government bonds yielding around 2–5% annually and corporate bonds offering slightly higher returns depending on credit quality. Bonds can be bought directly or through bond funds and ETFs, which provide diversification and easier access. While bonds are usually less volatile, they remain sensitive to interest rate movements, inflation, and issuer creditworthiness. Therefore, investors should carefully consider duration and yield when building their bond exposure.

Cryptocurrency

Cryptocurrency is a digital asset class that utilizes blockchain technology to facilitate decentralized transactions without the need for intermediaries, such as banks. The most well-known cryptocurrencies, such as Bitcoin and Ethereum, have gained popularity for their potential to appreciate significantly over short periods. 

Unlike traditional assets, crypto markets operate 24/7 and are highly influenced by speculation, news cycles, regulatory updates, and technological innovation.

While crypto offers the possibility of outsized returns, it also comes with extreme volatility and a high risk of loss. The market remains relatively young and unregulated compared to traditional finance, which adds to its uncertainty. Investors interested in cryptocurrency should conduct thorough research, understand how digital wallets and exchanges work, and allocate only a small portion of their portfolio to this asset class.

Private Equity

Private equity involves investing in established, privately held companies to improve operations, grow value, and eventually exiting through a sale or IPO. Unlike venture capital, which focuses on startups, private equity typically targets mature businesses and applies strategic, operational, or financial improvements to increase performance. Investments are made through PE funds managed by experienced general partners, often requiring large commitments from institutional or accredited investors, therefore not available for retail investors.

Private equity is known for delivering solid long-term returns, often in the range of 10–15%, but it comes with limited liquidity and long lock-up periods of 7 to 10 years. It also requires investors to be comfortable with less transparency and delayed reporting. Due to its complexity and size, PE is best suited for sophisticated investors seeking to diversify their portfolios with non-public assets and willing to commit capital for an extended period.

Startup investments vs. other asset classes - side by side comparison 

When comparing startup investments to more traditional asset classes, it’s important to understand their distinct characteristics and risk profiles. Venture capital, syndicate investing, and crowdfunding all fall under the startup investment umbrella, but each offers different levels of access, liquidity, and return potential. 

While all three are considered high-risk due to the early-stage nature of the companies involved, they vary significantly in terms of who can invest, the amount of capital required, and how investors can expect to engage with their investments. 

This side-by-side comparison highlights the key differences between startup investments and various asset classes, including stocks, real estate, bonds, cryptocurrency, and private equity, helping investors evaluate how each can fit into a diversified portfolio.

Invest in startups via SeedBlink 

As startup investing becomes a more recognized component of modern portfolio strategies, having the right infrastructure will make your life easier. From direct investments and syndicated deals to access to venture capital funds, SeedBlink enables both accredited and non-accredited investors to participate in curated early-stage opportunities across Europe. 

With SeedBlink, you can invest in European tech startups, starting from pre-seed up to series B, on the same terms as business angels & VCs, and access follow-ons and exit support. Additionally, you gain access to exclusive deals and the opportunity to become a shareholder in pre-IPO companies through our private secondary market.

‍Start investing with SeedBlink.