People invest in startups for various reasons, from diversifying their portfolio to wanting to change the world. But there is a big risk involved with investing in startups because of high failure rate. On the other hand, success ful startups tend to skyrocket because of the buzz around them and their innovativeness. And to be able to invest in the next big company you need to choose very carefully.
The idea is not enough
Don’t invest in startups that have nothing more than just an idea. The concept will not tell you anything about the potential of the startup. Maybe it will be the most brilliant idea you ever heard, but at the end of the day, the implementation is what really matters. You won’t tell if the project will execute successfully if there are no any actions yet. You need to know how the startup operates, how the team works together, what are their skills and abilities to estimate if startup will have some traction in the future.
Invest in people
Good teamwork often is a key to success. Conflicts inside the team are one of the most common reasons for startup failure. So choose startups where teammates work smoothly hand in hand. The best-case scenario would be if their skills complemented each other and created a well-performing team.
Do your research about the CEO of the startup. Successful founder or co-founder who already have some startups that took off is a perfect choice for the investment. Even founders who have not succeeded but have had some experience with startups are a better option then inexperienced one, because they already made some mistakes and, hopefully, learned from them. Entrepreneurs are usually addicted to accomplishing their goals so they will do their best to succeed.
Invest in what you know
If you invest in something you understand, chances are you will be able to tell if a startup is going in the right direction. It also will give you an opportunity to be engaged in a startup life more. Using your knowledge you can help startups and increase their chances to succeed and your chances to get a bigger return at the same time. Usually, because startups are inexperienced they are looking for a mentor, not just an investor. So it is a great opportunity to share your knowledge with them especially if you are investing in a startup in the industry you specialize in. Being involved in a startup life also will keep your mind fresh and up to modern trends.
Invest in couple startups
If you’re due to lose money, it’s best to make sure that you only lose a small part of it. Invest in a number of startups to increase your chances of success. But you still will need to choose your startups carefully. If you just spread the smallest amounts of funds across more or less interesting startups you can end up with very little return. Instead, study startups and choose a couple that you are most interested in working with, and divide your investment between them. This will allow you to diversify your portfolio and be involved in various interesting enterprises.
You can find a lot of interesting startups on Evestor (link here). It is a platform that helps startups to manage their projects and to network with investors. It will allow you to see startups’ projects, their progress and goals. And based on their projects you can decide which one is worth your investment.