A startup is an early-stage company looking for a scalable business model. Investing in a startup means buying a stake before it goes public, in exchange for money the company uses to grow. If the company succeeds, your stake is worth much more. If it fails — the most likely statistical outcome — you lose everything you put in.
It is not like buying shares on the stock market. There is no price on a screen. You cannot sell tomorrow. It is a long-term bet on something that does not yet fully exist.
In 2009, investing $11,000 in Airbnb's first funding round (when it was just an idea about renting out air mattresses) would have been worth more than $66,000,000 at its IPO price in 2020. But for every Airbnb there are thousands of startups that disappear without a trace. The statistics are brutal: according to a Harvard study of 2,000 venture-capital-backed companies, 3 out of 4 did not return their investors' money.