Invest in Startups: Are You Ready?
New business ventures, often called startups, are great investments for those who already have a lot of extra spending power, as well as those looking to increase their spending power. If you are looking for a new business for your investment portfolio, it is often a good idea to invest in startups. The key to successful investing is to follow a simple plan and reap the dividends as the business ages, develops, and increases. If you want to learn How to Raise Startup Capital, read on.
Be Your Own Boss
Many times the best investment you can make is in yourself, your own ideas, and your own abilities. If you have the idea, write it down in a business plan format, and work hard to make it become a successful venture. Stepping out into the world of entrepreneurship can be one of the riskiest of all career moves, but it is also the most rewarding. I’m sure you are probably ready to become a Startup CEO.
A startup means you will have more responsibility than you would working for a large corporation. They are usually comprised of a smaller number of staff, so that means no one else in the organization would have the same skill set as you or the same experience as any of your partners. When that skill set is in need, you will be the only person available to help. So, your time management skills will be paramount to your success.
On the other hand, you will also have more opportunities to try new things and expand your knowledge. There will be more work, but imagine how much more you can learn as you tackle each one, with limited help.
Locate Startups for Investment
If you decide against bringing your own business into the marketplace, you can join forces with someone else who is launching a new business. startups usually have a business plan in place before investors come on board. Knowing that the new business owner is an expert in the niche is always a positive sign that good things are ahead for the business. If your interests mesh with the startup’s interests, you might want to invest in this new company, but always do your homework to find out what plan is in place for business growth and potential.
Another option for investing in startups is becoming an Angel Investor. Angel investors provide funds for the startup and buy into the business for a piece of the pie. Some angel investors are silent partners, while others are more involved and participate in making business decisions. Some angel investors grab partners and go into the new venture together, while others take the gamble alone. Networking with a group will help you find the best business bargains so that you can get in on the ground floor before the business booms.
Protecting your interests is vital and top priority of venture capital firms and attorneys who are experienced in securities transactions. Consult with your attorney regularly during negotiations so that all the legalities are in place from the very beginning. Venture capital firms are in the business to help connect startups with investors. In addition, you will need a Startup Pitch to attract investors.
Often, capital is collected from several individuals by the venture capital firm and combines the money all together to make a larger investment for the startup. The firm claims an equity stake and keeps records called portfolios for each individual’s investment. Choose a venture capital firm carefully because using a more experienced firm increases the likelihood of dividends down the road.
Because startups are risky businesses, there are two potential outcomes: lucrative success or financial failure. For this reason, never invest money in a startup that you cannot afford to lose. Do not expect a profit for several years because, most of the time, startups do not turn a quick profit. It is best to use a long range perspective to be able to stick with the new venture and eventually reap the dividends. Patience is a necessary characteristic of a startup Investor.
Accredited Investors are investors who meet criteria set by the U.S. Securities and Exchange Commission. Those with $200,000 yearly net income or $1 million net-worth are considered accredited investors. At this income level, the SEC rules declare that the individual is wealthy and can invest in hedge funds, private equity funds, or directly into new businesses.
To Incubate or Not?
Part of the fear, when it comes to investing in startups, is having to go at it alone. No one is an island, we all need help, especially when beginning a new business venture. So, that is one reason why incubators exist. The purpose of an incubator is to provide resources that would be difficult to get without serious capital. These can include, equipment, temporary space and advice. You might also have the opportunity to connect with movers and shakers in your field that you wouldn’t when on your own.
At an incubator, you could have access to venture capitalists and angel investors. You may even get assistance with accounting and legal advice. That takes a large weight off of your shoulders during your initial stages.
Furthermore, there will be other startups working alongside you. This means, you can increase your professional network, and perhaps creative lucrative partnerships down the road. Not to mention, you might learn more about other new businesses that gives you some interesting ideas for your own.
Think For Yourself
Do your own digging and homework before you make an investment in a startup. Check out the market to make sure that conditions are favorable for the business to succeed. Rely on your information network, your instincts, and good old fashioned homework to determine if the business will succeed. Moreover, you want to get the word out with a Social Media Marketing Strategy for Startups.
It is always a good idea to invest in startups because every successful business and industry once had a beginning with just an idea, a plan, and an investment of funds, time, and hard work. Investigate, select, and invest wisely.
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