The number that no one is quoting: 14.7%. That is the average annual return of the S&P 500 over the last ten years, dividends reinvested, through the end of 2025. Not a great year. Not a lucky decade. A full market cycle, including a pandemic and a historic rate-hiking cycle, producing nearly 15% annually for anyone patient enough to sit in an index fund and do nothing.

Set that number against this one: 90%. That is the percentage of startups that fail at some point in their lifecycle. The Bureau of Labor Statistics puts first-year failure at 21.5%. Five-year failure at 48.4%. Venture-backed startups specifically fail at a 75% rate. And only 0.3% of crowdfunded companies have ever reached IPO status.

Young investors are choosing the second option over the first. Not because the math supports it. Because it feels better.

When Returns Became a Personality Trait

Consider what is actually happening here. In 2022, 73% of Gen Z reported owning stocks. By 2024, that number had dropped to 41%. In three years, roughly one in three young investors either exited equities or never entered. Meanwhile, platforms like StartEngine, Republic, and Wefunder are seeing retail crowdfunding investment on pace to hit $902 million in 2025, up 63% over 2024.

The explanation is not financial. It is psychological. As one data source put it, young investors are "chasing meaning, autonomy, and the chance to get in early on something exciting." For this cohort, being able to say "I was there first" matters as much as the return itself. That is not an investment thesis. That is a consumption preference.

Take a hypothetical 24-year-old. Call her Priya. She has $8,000 saved, earns $58,000 a year, and has just discovered equity crowdfunding. She puts $3,000 into three early-stage startups at $1,500 each, the average Reg CF check size in 2024. She feels great about it. She is backing real founders with real ideas. The other $5,000 goes into a high-yield savings account because the market "feels overpriced."

Statistically, two of those three startup investments will fail within five years. The third has a meaningful chance of going nowhere for a decade with no liquidity event in sight. The $5,000 sitting in cash will lose purchasing power at the rate of inflation. Meanwhile, $8,000 in a broad index fund in 2015 would be worth roughly $31,000 today at that 14.7% annualized rate. Priya would not have needed to pick a winner. She just needed to stay in.

The irony is that the generation most suspicious of Wall Street is about to hand its money to a class of operators with far less transparency, no audited earnings, and no liquidity mechanism. At least public companies have to file quarterly reports. Startups have pitch decks.

The Bet They Think They Are Making

The appeal, of course, is the Uber story. The Amazon garage story. The idea that if you had gotten in early, everything would be different now. Those stories are real. They are also profoundly unrepresentative of how startup investing actually works for retail participants.

Professional venture capitalists, with teams of analysts, proprietary deal flow, decades of pattern recognition, and diversified portfolios across dozens of bets, still see 75% of their investments fail. A 24-year-old with $1,500 and a TikTok recommendation is not doing better than that. The asymmetry that makes VC work as a strategy requires both the scale to absorb losses and the access to the best deals. Retail crowdfunding platforms offer neither. The median crowdfunding campaign valuation has stayed elevated even as VC-backed seed valuations dropped, which means retail investors are frequently paying more for worse deals.

This is not complicated. Professional investors with superior information, legal protections, and diversified portfolios fail at a 75% rate in the same asset class. The question of whether a retail investor with a $1,500 check should expect better outcomes answers itself.

The S&P 500 delivered 25% in 2024, then 18% in 2025. Three consecutive years of double-digit returns through tariff scares, a Fed tightening cycle, and peak geopolitical uncertainty. Goldman Sachs is projecting 12% in 2026, backed by earnings-per-share growth of 12%. Over any rolling ten-year period since 1945, 100% of those periods have been positive. That is not a guarantee. But it is a base rate that no startup portfolio can replicate at scale.

There is a reasonable argument for allocating a small portion of a mature portfolio to private markets. Diversification has value. Access to pre-IPO upside has value. But that argument applies to investors with substantial existing wealth, long time horizons, and genuine loss tolerance. It does not apply to a 22-year-old with $8,000 who has not yet funded a Roth IRA.

Bottom line for your portfolio: Young investors have time. That is their single greatest asset. Squandering that advantage on illiquid, unaudited, early-stage bets in an asset class where 90% of the outcomes are failures is not a generational investing strategy. It is an expensive way to feel like an insider. Max your 401k. Open your Roth. Buy the index. Then, once you have a real foundation, take your shot on a startup if you want. Just know that "backing someone's dream" and building your own retirement are not the same activity.