Why Do Entrepreneurs Prefer Starting a Business Over Investing in Existing Ones?

Investing in an existing business requires a solid additional capital and gives you limited control over operations, business goals, internal policies, and growth strategy.

Aspiring entrepreneurs lack that capital and want to be in charge of building a new business model solving a specific need. They usually aim for:

  • creating a new market niche,
  • providing a better service than competitors, or
  • offering a solution with a unique selling benefit.

Most of those who want to start their business barely know the grind that comes with it until they are finally there. I would often advise to explore other alternatives first before going all out. If you really want to start a business someday, you have to be ready to comply with the basic business requirements which include, but not limited to, a concrete business plan, a viable business model, and a validated business idea. 

These things can be overwhelming which is why others would also choose to invest instead. What does investing in a startup mean?

Well, investing in a startup means that you expand on the foundations laid by the founding team and the current staff. You tap into their current user base and comply with the product or a service offering.

The core business model is already established and you need to ensure that the existing revenue streams work fine and can be expanded, as well as finding new revenue models agreed upon by the team.

That makes sense as an investor who sees the potential of generating a multiplier on their investment within a certain amount of time. It has little to do with entrepreneurship unless you also join the team full-time as a co-founder and navigate a certain division of the business.

Would you prefer starting your own business or would you rather invest in an existing one?

Here’s a business strategy guide to help you out.