Investing in a startup company can reward investors both physically and financially. The feedback on investing money in Startup Companies is immeasurable. There are many things for investors to keep in mind while investing their money in Startups.
According to a report,90 % of Indian startups fail within the first five years. Hence as an investor, you must perform quality research before investing in startups. Check the tips below before investing in Startups.
Don’t invest before knowing the domain
To reduce the risks after investing in any Startup Company, the investor must know the domain in which the startup operates. This will help to attain the potential success in investing. Always make sure that the startup company will grow and money will return back to the investor. This gives hope to the business career.
Knowing the details of the founders of the company
It is important to place the founders of the company in the right place as they are the ones to determine the company profits and success in future. Especially for early stage companies, founders are necessary for developing the path to success. If one product is made, it is tested by many members in the founder group and finally released. So, founders must have the right place to show their talents to lead the company. Thus, the investor needs to focus on the founder’s background story. The story includes which companies, the education they are previously coming from and what type of value they bring to the table.
Don’t invest all money in a single track
The best way of reducing the risk of investing is multiple investing of money on different field tracks. This will increase the possibilities of success and will help to reduce risk. It will also increase the chances of getting money back with some profit or an offer by another company. This type of investment gives a result from the long gap. So, investors patiently wait for their turn and attain great heights in business.
Learn how to invest by joining in another group
When investors are struggling about how to invest money in Startups, they can simply join other members online and invest a part of the amount. Investors must learn by analyzing different deals made by another member to determine what makes them a proper investor. It is important to understand the market before making any type of investments.
Analyze the type of competition held on markets
Analyze what type of competition is there among market investors. The investors are suggested to invest their money in the beneficial domain. First, the investors should analyze the customers, what they wish and what they want. Feedback is the key for the startup to develop the project at the right time.
Also Read: How to Do Market Research
Keep an eye on investing money
The investors must keep an eye on investing money. They must watch for what purpose and how their money is spent. The investors must know that their invested money satisfied or reached the milestone of their startup company.
Review their legal documents
It is an important thing for each investor to review the legal documents because sometimes cheating occurs when investing in a startup company. This may involve how the company is structured and who is involved. The investors must know the structure and ancient history of a particular startup company and what percentage of ownership in the company they are receiving depending upon the amount of money that they are investing.
Main parameters for investing
- The first parameter for investing in startup companies is product or technology. The investors should be aware of what type of product is being developed by the Startup. They should also know of what type of problem occurs and when it occurs during investing money.
- The second parameter is the team. The investor should know the team which works for them and weather they work efficiently or not. They carefully choose the associates and workers in a team.
- The third parameter is scalability and competitive advantage. It means that can the business scale efficiently and cost-effectively. The investors should be aware if the business can be cost effective or not. It decides if the investor is suited for the business or not.
- The fourth parameter is the market. The investor should know the size of market and how it reaches customers. They must know the number of people who really uses their product efficiently.
Also Read: Top Funded Startups India 2019
If you are investing in a startup for the first time, then you must follow the above tips. Apart from that if you are not good in finance and laws, then it's better to take advice from experts regarding stocks, bonds, shares etc. Last but not least, do invest on a startup first then measure the progress and learn from the mistakes. Do share your thoughts on the comment section.