How To Invest In Electric Vehicle Based Startup?
As our culture advances towards a more probable and sustainable future, the electric vehicle has become the subject of the majority of conversations. Despite the fact that electric vehicles (EVs) have been around for a long time, the industry's level of technology and knowledge has significantly increased over time.
In fact, EVs outperform ICE vehicles in a variety of transportation policy objectives, including reduced reliance on crude oil, improved air quality, increased energy security, and decreased carbon emissions.
Electric vehicles are gradually becoming the prefered clean transportation technology of the future, which has long been viewed as a disruptive technology in the automotive industry. The goal of reducing pollution and reliance on imported oil has strengthened the case for electric vehicles. Last year, a record number of capital commitments and private investments were made in the electric vehicle industry, which is a focus for both established and startup automakers.
Since 2021, EV startups backed by venture capital raised more than $20 billion, more than doubling the roughly $10 billion raised by companies in the industry in 2020. After Ford and GM announced plans to invest billions in electric vehicles over the next several years, acquisitions, partnerships, and other sector activity are expected to increase. The electric vehicle industry is thriving, and investors with an interest in the sector currently have an abundance of options. Which is why, the question is Why Invest in EV Startups?
- When the first electric vehicle was introduced in the 1990s, it was difficult to envision an all-electric vehicle competing with the internal combustion engine. One should consider investing in EV startups because of the tremendous growth potential.
- Rivian Automotive Inc. which intends to manufacture full-sized electric pickup trucks and SUVs, recently completed an initial public offering (IPO) that raised nearly $12 billion, making it the largest IPO since Meta Platforms Inc. Rivian is just one of many companies.
- As the range of EVs increases and EV companies evolve their product lines, EV startups will play a crucial role. To maximise the viability of electric vehicles as dependable transportation options, ancillary infrastructure such as part manufacturing, EV filling stations, and EV repair schools will be required.
- Outside of vehicle manufacturing, there are numerous opportunities to invest in EV startups. The earlier you invest in the right EV startups, the greater their value will be in the future.
How to Find the Right EV Startups for Investment
Automobile manufacturers are the obvious first target for investment by EV startups. The issue with this strategy is that venture capitalists and major players have already identified and heavily backed the EV manufacturers most likely to succeed. Therefore, it may be difficult for you to acquire a sizable stake in EV manufacturers.
Targeting the companies that will provide logistical and technical support to EV manufacturers is another method for gaining an early foothold in the EV startup market. If the predictions of analysts regarding EV sales are realised, the industry will require support for everything from battery production to public charging stations. In addition to cars, there are a variety of EV categories entering the market, including heavy trucks and motorcycles. Electronic bicycles are gaining popularity as well.
- Angel Investors: Angel investors are influential individuals or networks of wealthy investors with familial ties and substantial experience. The majority are seasoned entrepreneurs who have been through the process of launching a business. They are aware of the challenges and opportunities.
If you are one of these investors with excess capital and a willingness to take risks on seed-stage ventures. Before making an investment, you must screen the startup, conduct research, and examine the founder's investment history. Once convinced, provide funding in exchange for convertible debt or equity ownership.
- Venture Capital Funds: The mission of venture capital funds is to finance promising new businesses. At this stage, funding for startups advances to the next level. As institutions, venture capital funds provide substantial capital for the growth and expansion of a business and monitor its progress to ensure that their investment promotes sustainable growth. Startups provide venture capital funds with equity or equity-linked instruments in exchange for funding. They leave when the company issues an IPO or is acquired. Regarding EV, venture capitalists may assist in their rapid expansion.
- Crowdfunding: Crowdfunding is a less common source of funding for startups. Multiple retail investors in search of alternative investment opportunities assemble on a platform, analyze the business model, and invest in the startup of their choosing. Each investor invests a fixed amount in a business idea (peer-to-peer lending) with the expectation of earning a higher rate of return. Additionally, there is equity-based crowdfunding, whose legality in India is debatable. Always, individuals interested in the Electric Vehicle Industry have the option to search for startups utilizing crowdfunding. Currently, StartEngine has a number of appealing offerings, including Rumblemotors, a startup that manufactures electronic motorcycles. T4L, a startup subscription service for EVs, is an additional intriguing StartEngine offering. Wefunder.com also offers an EV subscription service called Ecarra, which specialises in luxury EVs.
Selecting Startups for Investment
Ford, General Motors Company and Chrysler, which is now owned by Stellantisare collectively referred to as "The Big Three" because they are the three largest automakers today. At the outset of the automotive industry, there was competition for market share among automakers. However, only these three have withstood the test of time and lasted more than a century. If past performance is any indication, many of today's EV manufacturers will fail in the same manner as their predecessors.
Despite the excitement surrounding electric vehicles, only a handful of EV manufacturers will survive. Consequently, investing in EV startups is just as risky as investing in other startups, if not riskier. Choosing which company to invest in when dealing with a nascent industry like electric vehicles (EVs) is extremely difficult. However, high risk yields high reward; early investors in the Big Three created wealth for themselves and their families that lasted generations.
Finding startup EV manufacturers to invest in will likely be a costly endeavour for retail investors. If you don't have that kind of risk capital, it's probably best to invest in a startup that has already been vetted by a credible equity crowdfunding platform. There are several reasons why this is preferable to attempting to predict which EV manufacturer will still exist in 100 years.
- First, many EV startups on equity crowdfunding platforms will have been screened by the platform's financial professionals.
- At a bare minimum, the business model, product, and future potential of the startup have been determined to be viable by professionals in this field.
- These opportunities offer buy-ins that are manageable.
- In addition, numerous equity crowdfunding platforms offer investments in EV-related industries with potentially lower risk than EV manufacturing, such as battery manufacturers and EV subscription services.
Prior to the past two decades, it was nearly impossible to imagine an electric vehicle (EV) like the Tesla racing down the highway that rivalled that of the fastest traditional sports cars. However, that time has arrived. This futuristic reality represents a tremendous investment opportunity for EV startup investors. If you're looking to invest in a growing industry, you owe it to yourself to consider electric vehicle (EV) startup companies.
Well, investing in EV startups follows the same fundamentals as investing in any other industry. Before it's too late, educate yourself on the industry, diversify your investments, and get in on the action. Because EVs will continue to exist. That was my point of view, what is yours?