Investing in Startups
Do you want to invest in a start up ? Are you considering investing in a startup because of the great opportunity to generate significant returns.If this is your aim,then the right strategy is to get into the right start up in early stages.The later you invest the smaller will be your returns going to be.You will have less risk and more returns investing early.Catch them young
Investing in Startups
You can purchase company shares of startups through online platforms like Republic,Seedinvest,Microveventures.These platforms offer direct investing in the startups or through Venture capital fund that invests in the pre-IPO
Should I invest in a startup company?
You’re most likely considering investing in a startup because of the great opportunity to generate significant returns. If that is the goal, then your strategy should be to get in with the right startup as early as possible in its life cycle. The longer you wait, the smaller the return opportunity is going to be. In other words, the less the risk, the smaller the return.
How to Invest in a Startup
Investors can purchase company shares online through crowdfunding platforms, buy into a privately managed startup or venture capital fund that invests in pre-IPO opportunities, or work directly with a local company to buy a percentage of equity.
Crowdfunding has opened the doors for regular Joes to invest in startups, but doesn’t offer much return for the investor. The appeal is that it provides the average investor with an opportunity to invest with a small amount of capital. Investing in a startup can have many personal and financial benefits.
In May 2016, Title III of the JOBS Act, otherwise known as Regulation Crowdfunding, came into effect. This legislation made it possible for ordinary people to invest in startups by easing the restrictions about who could and could not invest in small businesses and private companies.
Prior to the JOBS Act, an investor needed to have a net worth over $1 million or make more than $200,000 a year to qualify to back most companies. Now the opportunity is open to anyone, however current regulations do set some limits:
Individuals who earn less than $100,000 are permitted to invest up to $2,000 or 5 percent of their yearly income.
Individuals who earn between $100,000 and $200,000 may invest up to 10 percent of their yearly income.
With the 2016 Securities and Exchange Commission crowdfunding regulation, investing in startups was no longer limited to accredited investors. The opportunity was open to anyone, using a variety of different methods, some of which include:
Buying into a privately managed venture capital fund or startup that invests in pre-IPO opportunities
Working directly with local companies to purchase a percentage of equity
Using crowdfunding platforms to purchase company shares
How to choose a startup ?
Selecting and investing in a ups is not an easy game, choosing correctly could generate returns that could yield many times on the initial investment.When investing in a startup domain , it’s important to consider:
Choose the domain you know:
The best way to lower your risk to invest in startup in a domain that you know and understand the market very well.You will have an idea of how the company and corresponding industry operate .You can make an informed decision
Diversify your investments:
If you invest in one startup, the odds are pretty good that you will lose all your money. If you invest in 10, you might find one that pays for the rest of them. Instead of putting all your eggs in the same basket make multiple investments. This will increase your possibilities of success and will also help to reduce the risk involved. It will also increase your chances of getting your money back with some returns at a liquidity event such as a public offering or an acquisition by another company.
Business Structure:
Review the business set up and look at the articles of incorporation, by-laws if available, investor agreement, subscription agreement, etc… This step is all about getting familiar with how the company is structured and who is involved (directors, investors, advisors). Additionally, here is where you want to pay special attention to how the startup has structured the deal and what percentage of ownership in the company you are receiving for the amount of money that you are investing.
Exit Strategy :
The most important things to keep in mind when investing in a startup is to have an exit strategy. A startup company could use all of your capital even before the doors open and it could take years before they begin turning a profit. Even when the company is successful and you begin receiving dividends, you may have difficulty withdrawing the original investment. Therefore, when preparing to invest in a startup, keep in your mind what your exit strategy should be
You can find good startup investment opportunities on Republic , the world’s largest online investment platform founded by alumni of AngelList
