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When you make an investment in an early-stage venture involving equity, you own a piece of that company until it makes an ‘exit’. Getting purchased by another company, selling shares on a public stock market (known as an initial public offering, or IPO), or bankruptcy are common exit scenarios.
That makes company investing one of the most potentially rewarding, and most risky, ways to invest your money. Some companies grow to become icons of an era, like Google, Facebook, or Apple. But for every superstar, there are numerous respectable but quiet exits, and many failures.
That’s why due diligence is so important. Investors need to be as well-educated and confident in their decisions as possible. Losing some or all of your investment is a very real possibility.