Startup investments are more like gambling with the only difference being that you get to choose and finally decide where to loose your money. However, there is also a brighter side to startup investments if you start using your instincts properly. Startup investors need to focus on their paths and must be keen enough to get into the business and find out its real benefit in order to make their startup a successful one. Startup investment is not at all easy but you can strive hard to make a room for yourself.
Here we are sharing 15 important tips for the first-time startup investors. Have a look!
You can easily avoid the risk of failures by investing in the domains you know. Make a thorough research about the ups and downs of the market and project the most successful ventures. Invest in the deals which are more likely to return your investments in a smaller amount of time.
2) Who are the founders?
Before investing anywhere, make sure you are opting for the right people. Check about the real founders. Who are you working with? Dig into their history and profession and then make a final choice. After all, reputation in the market matters the most.
3) Cash in Hand
When you are starting up, make sure you have enough capital to make up to your commitments. You must be having some good cash in your hands as your opportunities won’t wait for you to arrange some. You can’t afford to back off from your commitments or deals as this business arena is quite small and ill will spreads faster than light.
4) Be Patient
While starting up, you need to realize the value of patience. You can’t get all your investments back in just a year or two. Even if your startup is really successful, you will need at least 5 years or more to get back all your investments. However, nowadays people opt for liquidity to get their money out of a private company. No matter which way you choose, you have to be patient.
5) Multiple Investments
Relying on one deal is usually the cause of failure for novice entrepreneurs. You should go for investing in multiple deals initially. Once you start getting profits, you can narrow down for focus and opt for the things which suit you. That way you can turn your small startup into a successful one.
6) Deal Flow
Being a beginner, you must be longing to check all the deals before falling for any one. In this case, the best thing is to join a crowd funding platform that will provide you an access to a huge flow of deals. The most common practice is to go online and look up as many deals as you can before you opt for the final one!
7) Be Realistic
There is a very famous norm that most of the startups fail badly. Therefore, you must keep that in mind while taking any initiative. You can’t always be successful in one go. May be you end up badly just like others did and may be you get successful more than others. It will be either of the two ways. You just need to be realistic and work hard.
8) Explore the Market
Giving competition to all your competitors is the major achievement that a startup can achieve since that is the most critical step. Moreover, investigating the thirst of the market can also be quite beneficial for you. You can do that by taking feedbacks and considering them for your own success in the long run.
9) Use of Funds
As an investor, it is very important for you to check out the startup’s use of funds. Find out how, what and why are they going to spend their money. What are their major concerns and what is their prime goal. Check their own salaries and they pay they offer to their employees. Make a final analysis of their cash flow and then decide whether to invest or not.
10) Monetization Strategy
Before investing anywhere, you should examine the monetization strategy of the company. It is really important to check out how the company operates and the amount of cash flow it has. It is useless to invest in a company which can’t carry its own burden.
11) Estimating Profits
At startup, it is very difficult to actually predict the profits you will be getting after 5 years or more. However, a company is considered to be well-prepared and worth investing if it has planned some figures and displays its expected profits and future plans. Such a startup is worth the investments.
12) Investment Benefits
A startup always looks up to the investors for additional benefits other than money. The investors, apart from giving money, can invest in by either providing mentors or providing them some new connections which can help them in expansion. Investment does not always refer to money!
13) Legal Documents
Legal documents are the most essential part of any startup. Everything must be in black and white. There should be concrete articles of incorporation, investor agreements, subscription agreement, term sheet and etc. You should be familiar with the company and its structure, before getting involved.
14) Exit Strategy
You need to have a predefined exit strategy for your startup. Every startup must have an exit strategy since the beginning otherwise the investors will think twice before working with you. You must also have a list of competitors interested in acquisition or you should have a plan to go public like Facebook.
15) No Shortcuts
As we all know, time is money for business people. However, being a startup investor the tables turn a bit here. You just can’t go for shortcuts and make more money in less time. Initially, everything takes time so you need to sit back and relax and let things work their way. No hurries so no worries!
Being a startup, you will have to use your brain as well and then decide. I hope these tips help all the startup investors. All for now!