Statistics show that only 50% of the businesses that have employees will survive past the first five years.
This can be a difficult statistic to look at if you are considering investing in a startup.
How can you determine what a good investment is? Are certain startups more likely to succeed than others? What should you focus on when researching these companies?
Keep reading to learn about a few things to consider when investing in startup companies.
1. Research Before Investing In Startup Companies
Research is the homework that is needed before a dime is ever put into investing in any company. Without doing any research, there is a massive risk to investing in new businesses.
The more information that you can find about the founders, their business plan, and the current market will be helpful in this process. Getting familiar with their current financial numbers can all be helpful in improving your chances of investment success.
This research may not be a simple Google search but rather talking with others that have experience investing to see where they think that you should start.
2. Consider Your Involvement
How involved do you want to be with the startup you invest in? Do you plan on investing a significant amount in one startup?
There is also an option to give smaller amounts to several businesses to lower your risk.
Depending on your contribution, you may be able to take part in the business. There are certain companies that have shareholder meetings and look to investors for their thoughts when discussing matters that have large financial implications.
3. Discuss The Business Plan & Ask Questions
Finding out the five and ten-year plans for the business can give you a better idea of your potential returns. A team with a clear vision of how they will succeed in the local market should be able to answer any questions about the business that you have moving forward.
It is important to ask as many questions as possible before investing so that you aren’t running into surprises that could have been avoided before investing. Many investors like to know exactly where the money will be spent and how that will result in the company’s growth in the immediate future.
If you see the potential in certain businesses, such as an innovation platform, you will want to follow your instincts when investing in them. Getting emotional in investing can be a dangerous approach and cause you to make poor decisions based on feelings instead of numbers.
Start Investing Today
Now that you have read more about a few things to consider when investing in startup companies, you can begin investing today. The hours of research you put in, along with following these tips, will have you prepared to make a sound investment.
Make sure to read some of our other articles; we have a variety of resources available for you to learn more about tech, products, and business-related activities.
