Investing in startups can be quite a tricky business, and in fact, some studies find startups to have a 90% failure rate. On the flip-side, you can hit the jackpot and end up being a millionaire or even billionaire in record-breaking fashion if you do invest in the right startup of course.
It is worth noting that while the startup business is indeed a risky affair, all you have to do is only pick the right industry, to break the bank.
Most tech-giants started out small, –HP, for instance, started out in a garage – where the owner had to rely on family and friends to invest in their vision.
The outcome? Most, if not all of these friends, family and a small group of lucky outsiders who invested in these companies turned every $1 into $100. In a nutshell, investing in startups can only have two possible outcomes.
The first is you get rewarded for your faith by earning millions if all goes well, or conversely, lose everything you invested. Is there a way to avoid the latter outcome? Well, let’s have a look.
What to Know Before Investing in Startups:
While there is no surefire way to guarantee your investments, you can always reduce the risks involved by following these simple tips.
Invest in a Familiar Niche
Never invests blindly regardless of how sweet the deal sounds or looks on paper. To reduce risks, – as is the case with any business – always strive first to understand the market you are getting into, before anything else. With this, you can make an informed judgment based on the expected projections shortly. Of course, things can always go wrong, but you stand a better chance of getting your money back as an investor, with extensive research to back up your decision.
Most people end up making losses just because they placed all their eggs in one basket. Indeed, business is all about reducing the risks involved, and this can be enhanced by simply diversifying your investments in different startups. By doing so, you not only significantly boost your chances of success, but also greatly reduce the risks of all your savings going up in smoke. You’d rather gain dismal profits here and there, than nothing from a single venture in the long-term.
Grilling the Founders
In business, the company is always as good as the brains behind it, meaning the founders of the prospective startup, are indeed your greatest asset. In short, it is all about having the right people on every desk and chair. While grilling the founders, focus on their background – primarily their education, career and business ventures if any.
This will not only help you sleep better at the end of every day knowing that your money is in good hands, but also help you increase your chances of becoming wealthy – the main idea.
In conclusion, business startups can be quite rewarding; but only if all goes well. It starts with how well you cushion and place yourself for success.