Investing in start-ups can be incredibly rewarding. If you’re looking for somewhere to invest your money, a start-up should be one of the options you consider. Although it can be a risky investment, the return can be huge. But how do you find start-ups to invest in?
There are many business investment opportunities in new startups. Here is a guide on how to find startups to invest in:
1. Get organized
When finding startups to invest in, organization is important. Namely, decide on the amount of money you are willing to invest in a company.
Then, decide on the industry or area of an industry in which you are interested. You may want to pick an industry where you have some experience or knowledge, as it will help you to make educated decisions about important matters as an equity holder in the company.
2. It’s who you know
You may already know someone who is launching a start-up, and this could be the perfect opportunity to invest. It is not a bad idea to do business with friends and family, however it is important to draw clear boundaries.
Just because you are friends, doesn’t mean you can go easy on each other when it comes to good or bad business decisions. Honesty is key. But, knowing someone in advance can make the whole process easier, and if you believe in their product or service, it makes sense that they would be your first choice.
3. Ask around
Word travels, and a great way to find a start-up to invest in is to ask your network. As an investor, you could ask for equity in the company, which would give you some decision-making power.
Be aware of the industry or industries you are most interested in, and talk to anybody and everybody who you know who might have contacts in that area. In addition, attend events where you know industry people will be.
4. Online networking
We live in an amazing time where you can get in contact with someone who is half a world away within half a second. Use this amazing tool to seek out start-ups that you might be interested in investing with.
By using the many sites designed for connecting business professionals, such as LinkedIn or even Twitter, among many, many others, you can easily come up with some potential investment candidates.
5. Use a service
If you have money to invest, use an angel investor service or a peer-to-peer lending service that can help match you up with start-ups in the industry of your choosing. With services like these, you will have access to a start-up’s profile, so you can analyze it to see if it’s the right fit for you.
6. Join an investment group
Investment groups are a collection of businesses and people who want to invest in start-ups and small businesses. By joining with a pre-existing group, you’re gaining access to their already-established knowledge and contact base, and will be able to join forces with other investors like you.
7. Start-up accelerators and incubators
These are the places where start-ups go to thrive. If you’re looking to invest in a start-up, you could do some hunting at a start-up accelerator or at a start-up incubator.
Although the two are slightly different, they both are home base for a lot of start-ups who are looking to become established or who are looking to expand their already existing business.
8. Get creative
There is no reason why you could not advertise an ad or a sort of “competition”, so to speak. Explain what you are looking for and release the information to the public – let the start-ups come to you.
Don’t feel confined to the typical methods of investing if they don’t speak to you. That said, using a pre-existing method means the creases are already ironed out. If you’re paving your own way, you’re likely to run into some bumps.
9. Once you’ve chosen a start-up
Before finalizing your decision to invest in a start-up, make sure to meet with its founders. Ensure you get along, and that you are all on the same page as to what your investment and involvement in the company will be.
It’s crucial that you have a good relationship with these people – you are giving them a lot of money, and with that you are giving them a lot of trust. Don’t be afraid to go with your gut. If something doesn’t feel right, then don’t go through with it.
10. Ask questions
If all of the above checks out, there is just one last step before you’re ready to sign on the dotted line: ask some questions. It is your responsibility, as an investor, to be aware of everything that might be going on behind the scenes. For example, is the company in any financial trouble or serious debt that might cause problems?