Startups are everywhere. In the last few years, they have become a real buzzword in the business world. As someone who might want to potentially invest in startups, what are the things you should know?
Depending on who you ask, startups are either businesses looking to solve a niche problem where the solution is not obvious or those still in their infancy. Investing in one requires you to be familiar with all the risks and possible rewards of doing so. Furthermore, there are specific methods that are good to follow in gathering all the information you need to decide whether to invest in a startup or not.
This post will talk about all you need to know if you are planning to invest in startups. It will explain what they are and give you an idea of how to go about deciding whether or not you want to invest in one. Towards the end, we will feature a section where we, the PGN, introduce ourselves and let you know how we can help you with this as well.
Without further ado, let us get started.
What is a startup?
According to Forbes, a startup is not a strictly defined term, but it is important to have a general idea of what we are talking about if the rest of this post is to make sense.
Depending on who you ask, a startup can be a variety of things. Some people say that a startup is any company that is looking to solve a specific problem that does not really have an obvious solution. Others will, on the other hand, call fledgling business startups until they grow sufficiently.
Most of us vaguely understand what a startup is, and the reality is that there is truth to all of the definitions, depending on which angle you look at it from. The important thing to keep in mind is that they are generally new companies run by young, ambitious young people who are looking to offer an innovative solution to a problem.
As a startup grows, they will usually lose that title as the problem will have already been addressed, they will have grown, and their CEOs and members will have lost some of their drive and/or passion in order to make room for wisdom and stability.
There is also a certain type of culture associated with startups, involving stereotypes such as blind ambition, small offices, and a small number of enthusiastic employees. Likewise, although startups do not necessarily have to be associated with tech, the mainstream view is that most of them are.
Investing in startups
We will now go over some of the guidelines to follow if you want to invest in startups. According to business.com, here are the things to look for, things to avoid, and steps to successful investing.
What to look for
Ambitious founders. Invest in people. not companies. You should investigate what sort of person(s) is running the company. Look for traits such as ambition, drive, and openness. Do not be put off even by a mild obsession—it is often necessary. Make sure they strongly believe in their vision and are ready to fight for it.
Customer adoption. This is of crucial importance. No matter how well the startup can sell their vision, you should pay attention to how their product is doing now to see if it is worth investing in in the long run.
Chemistry. This is a cliche but it is very true. You should only invest in companies that you feel embody your values. Doing otherwise will result in you not feeling good about your investments and will make eventual failures feel even worse.
What to avoid
Overhyping and overpromising. Being a good salesman is crucial to running a startup, but keep an eye out for those who make outrageous claims and predictions about their company's success. There is a fine line between confidence and delusion.
Risky industries. Stay clear of industries that deal with shady business areas such as marijuana and cryptocurrencies. You cannot achieve long-term stability by avoiding the law.
Getting bogged down in numbers. Do not focus on numbers at first as they can cloud your judgment. Pay attention to the people and the big picture at first, and then move on to the math.
Steps to invest in a startup
Investigate. Before sitting down with the founders, go over their papers and make sure everything is in order: incorporation, their leases and contracts, how their shares are issued, and everything in between.
Run the numbers yourself. Unlike the numbers we talked about before, those that you yourself run are generally a good indicator. Check how much money they have already raised and find out if you are the first one in the investment pool.
Think about it. Investing in a startup is a risky decision. You may not be able to cash out for years and will probably lose some money. Consider if you have the patience, stomach, and liquid capital for this.
How we can help
Investing in a startup is a risky affair and the odds that you will lose money are high. For this reason, you will most likely need some help.
We at the Produs™ Global Growth Network (the PGN) specialize in connecting innovative technology with business buyers and provide match-making, testimonials, ratings and a network of local consultants to assist with deals.
When it comes to investing in startups, we can lower your risk of failure by giving you the correct guidance and providing you with our database that is teeming with great startups and solutions. Therefore, if you are looking for startups to invest in, be sure to contact us.
People tend to have differing opinions when it comes to what a startup is. Whichever definition you choose to follow, it is important that you know the things to look out for when deciding which startup to invest in.
Because this is a risky venture, you are better off with help from those with experience in the field. We at the PGN have that experience and can help you with our comprehensive library of startups and solutions. If you are toying with the idea of investing in a startup, do not hesitate to get in touch.