Key Things to Keep Note of While Investing in a Startup

This content has been authored by Mr. Neeraj Tyagi, Co-Founder, We Founder Circle.

Contemporary society is dominated by a plethora of ideas. They pique human curiosity, guide societal decisions, and power our growingly knowledge-based economy. The startup world in itself is an industry of ideas, offering sophisticated solutions to everyday complications. Startup ideas are typically fuelled in response to existing challenges in the industry, business model, society, or location. Nevertheless, not all ideas progress past their infancy. Some succeed, and some fall flat. While startups offer massive possibilities for high returns to investors, however, profits come with significant risks that many investors are ready to undertake.

Since startups are novel businesses in their early stages, the limited cash flow and exorbitant prices don’t have the force to drive them in long term without monetary support from venture capitalists. Capital venture experts suggest that thousands of new ventures annually receive billions of dollars from angel investors to kick-start their businesses.

In India innovative and promising startups have raised $19.7 Bn in funding so far in 2022. So whether you are a first-time investor or have been investing for many years, there are some basic thumb rules to follow before investing. Here are some key things to keep note of while investing in a startup:

Angel Investing is Active Investing Asset Class

Unlike in other investment options like stock, real estate, or gold, angel investing requires personal involvement & engagement with founders. One needs to keep engaged with the ecosystem to stay updated on industry trends, strategies, competitive landscape etc. Also being actively involved with founders will give you more clarity & insight into business growth, challenges & opportunities. Therefore, the job of the investor doesn’t end just after placing an investment. It is of vital importance to do leg work to improve the chances of a higher return and success. Some networks offer a tech platform for you to stay better connected with founders. Mentoring the startup, financially supervising the startup, and assisting in the establishment of business relationships on behalf of your investment are all examples of types of involvement.

Portfolio Approach of Investing

The entire premise of portfolio investing is to guarantee that you can broaden your investor profile. Portfolio investments are made in a range of assets (equity, debt, mutual funds, derivatives, or even bitcoins) rather than a single asset to generate returns commensurate with the shareholder’s risk profile. Diversified portfolios have lower portfolio risk and volatility than single portfolio positions as it allows shareholders to spread out some of the downside risks of a single investment position without necessarily lowering the expected return rate.

Invest with Network or Seasoned Angel Investors

It is helpful to involve with an angel network or seasoned angel investors before committing to a company. It is recommended to pick someone who has expertise or majors in the field than to take a chance on intuition. A consultant can better assess the backgrounds of everyone involved in business management. They can also better guide with the resources to be invested in a startup since they are well-versed in the particular industry and are updated with the market competition and pitfalls.

A good angel network will provide you with better curated deals with proper due diligence. Additionally, angel network also enables you to keep track of your investment by receiving regular updates and actively working to ensure exits through the next round of funding, which is difficult to achieve when investing individually. Working along the same lines, We Founder Circle (WFC) is a global community of successful founders & strategic angels that have come together to push the start-up industry and steer it towards aggressive growth. WFC invests USD 50K- USD 2Mn amount in early-stage start-ups that are fueled with ambition, sustainability, and a strategic approach.

Use more technology

Technology has long been regarded as a facilitator of business modification. It is rapidly becoming a disruptive force of traditional business models and thus cannot be ignored. The investment industry is constantly changing and sensitive to data acquisition, data analysis, information dissemination, storage distribution and turnaround times. Therefore, it’s wise to invest through networks which use tech platforms like Invstt.com, as they have a better transparent way of showing you startup investment opportunities, giving you a dashboard-driven experience to discover good deals and help you track your investment portfolios. In addition, making use of social media will increase your visibility among startups and top-notch investment circles. This simultaneously improves your chances of getting better deals, and opportunities to invest.

Conclusion

The startup investment landscape is experiencing an age of enlightenment. Individual shareholders now have unparalleled access to top startup investment prospects previously reserved for the angel group of investors. There are numerous platforms, strategies, and types of returns that must all be explored and fully grasped before investing. The stakes are definitely high, but the rewards are enticing too.





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