Miguel Rodrigues logoMiguel Rodrigues

| 5 min read

Startup investing: explained simply (really simply)

For a long time, hearing about funding rounds, VCs, seed or Series A felt like a completely different language. It all sounded complex, closed-off, and only for people already inside the ecosystem. The truth is, the concept is much simpler than it looks. At the end of the day, it's just people putting money into ideas with potential.

  • Startups
  • Investing
  • Finance
  • Business
  • Entrepreneurship

Startup vs traditional business (before anything else)

Before we talk about investing, we need to clear something up that a lot of people get wrong:

a startup is not just a small or new business

They are different things.

Traditional business

A traditional business is what you see every day:

  • a coffee shop
  • a barber
  • a restaurant
  • a local store

The goal is simple:

  • make profit as soon as possible
  • grow steadily
  • keep the business running long-term

👉 they use proven models
👉 usually serve local markets
👉 growth is slower and predictable

Startup

A startup is a completely different game.

  • it starts with a new idea (or a new approach)
  • it’s searching for a model that works
  • it wants to grow fast and at scale

👉 often not profitable in the beginning
👉 focus is growth, not stability
👉 usually thinks globally from day one

The difference in one sentence

If I had to summarize:

a traditional business wants stability
a startup wants to grow as fast as possible

Or even simpler:

  • business → “I want to make money”
  • startup → “I want to build something big”

So, what is startup investing?

Now we can get into it.

Startup investing is basically this:

someone gives money to a company in exchange for a percentage of it

That’s it.

But there’s an important detail:

  • the startup usually isn’t profitable yet
  • sometimes there’s no finished product
  • sometimes it’s just an idea

So you’re not investing in what the company is today.

You’re investing in what it could become.

Why would anyone do this?

Because if it works… it really works.

The logic is:

  • 10 investments → 7 fail
  • 2 return something
  • 1 explodes (10x, 50x, 100x)

That one makes up for everything.

Who invests in startups?

Friends, Family & Fools (FFF)

Yes, that’s actually what it’s called 😄

  • friends
  • family
  • people close to you

👉 very early stage
👉 based on trust more than analysis
👉 they’re investing in you, not the business

Business Angels

These are individuals with money who invest in startups.

Usually:

  • former founders
  • experienced professionals
  • people who understand the game

👉 they don’t just bring money
👉 they bring experience and connections

Venture Capital (VC)

Now we’re in “serious mode”.

  • these are funds (not individuals)
  • they invest other people’s money
  • they look for startups with huge potential

👉 the goal isn’t small returns
👉 it’s finding companies that grow massively

Funding rounds (the part that sounds complicated)

In reality, these are just stages.

Each stage = the company is at a different point.

Pre-Seed (the very beginning)

You’re basically at idea stage.

  • maybe you have a prototype
  • maybe not

Money is used to:

  • test the idea
  • validate the problem
  • build an MVP

Seed (something real exists)

Now you have:

  • a product (or close to it)
  • early users
  • signs it might work

Money is used to:

  • improve the product
  • get users
  • test the market

Series A (time to scale)

At this point you’ve proven:

  • there is demand
  • the product works
  • there is growth

Now the focus is:

  • scaling
  • hiring
  • growing faster

Series B

It’s no longer:

“does this work?”

Now it’s:

“let’s dominate this”

Money is used to:

  • expand
  • go international
  • improve operations

Series C, D, etc.

Now we’re talking about:

  • large companies
  • global growth
  • preparing for exit (IPO or acquisition)

How this evolves over time

In simple terms:

  1. Idea → Pre-seed
  2. Early product → Seed
  3. Traction → Series A
  4. Scale → Series B+

USA vs Portugal (real difference)

🇺🇸 United States

  • way more capital
  • higher risk tolerance
  • very mature ecosystem

Result:

  • bigger rounds
  • faster growth
  • more competition

🇵🇹 Portugal

  • smaller ecosystem
  • less private capital
  • more public support

But:

  • lower costs
  • strong talent
  • access to EU funding

The part most people ignore: support in Portugal

This is important.

In Portugal (and Europe), you can often grow without giving away as much equity.

  • startup grants
  • public funding
  • tax incentives

👉 money you don’t have to repay
👉 and you keep more of your company

The key difference

👉 USA:

  • growth funded mostly by investors
  • you give up equity earlier

👉 Portugal / Europe:

  • more non-dilutive funding
  • you can keep more control

So how does this actually play out?

The “typical” path looks like this:

  • you start with an idea
  • raise some initial money
  • prove it works
  • raise more money
  • grow
  • eventually exit (sell or IPO)

But reality is harsher:

  • most startups fail
  • few reach Series A
  • even fewer reach big exits

Final thought

At the end of the day, this isn’t that complicated.

It’s just:

people with money betting on people with ideas

But everything changes depending on:

  • what stage you’re in
  • what proof you have
  • how much risk is left

And Portugal, even though smaller, has something interesting:

👉 it gives you room to try… without immediately giving away your company.

If you made it this far, you now understand startup investing better than most people.