5 Essential tips for investing in startups

The Investment world is full of scare stories when it comes to investing and rightfully so as the US government has been trying to protect their people from the financial strife it suffered after the Wall Street collapse since 1929.

Only 16% of U.S. households had actually invested money in the Stock Market to that date, yet it was the ease of how just anyone could invest without reasonable fiscal education.

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Later followed the; ‘Sophisticated Investor’ a term given to people who had access to stock floated funds after a certain level of examinations were taken and passed, and they could then manage portfolios.

This was kind of the way the world plodded along until the 1990’s when the Internet of Things brought massive change. The new wave of technology opened many doors for entrepreneurs to start a business online without all the profit draining resources a traditional business had before, like an office, office staff, getting to and from work on a daily basis, sales and marketing teams, and the ubiquitous dot matrix printer for invoicing and the notorious over-head projector for those of us over 40!

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Now young teenagers are creating simple websites, getting a PayPal account, using social media as their marketing and selling online. Young Mothers are penning great blogs that reach out to other mothers and getting a good price for baby adverts on the site. Pensioners are becoming antique experts and running a profitable business at home from their computers. They are now known as Silver Surfers.

Along with this rise of the online entrepreneur comes the simple Investor, it could be you, and you don’t need to pass exams to invest in your nephew’s latest online idea, and you never know, it could be the next Facebook and bring you wealth you dared dream of when it goes public.

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Here our 5 top tips for startup Investors

Finding the Opportunities

The Investments you can make or lose the most are the ones that come from family and friends. All the Facebook founders were University friends, same as Google and Microsoft…

Other places you can find new startups looking for some help are a the number of new shows popping up like Rise in Asia

There are many incubators in cities all around the world a place where startups can be grouped together often by Investors and be given all the administration, Investment and business support a new start up needs and Investors are always asked to visit and meet these new groups and the individual members within the incubators.

Any private financial advisory should be able to furnish you with a list of private placements.

Attending Tech start up networking events there is one every month Tech meet up in Bangkok and a new one starting  in Chiang Mai.

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Invest in what you know

Warren Buffet the founder of Berkshire Hathaway considered to be the most effective investment company today, has a simple rule which is; to only invest in stuff you like yourself and know. He has large shares in Coca Cola as he drinks the stuff, and he invested in one of the restaurant chains where he eats at regularly, sound and simple advice.

One of the best things about investing in startups as opposed to handing over your hard earned cash to a financial advisor to manage your money through mutual funds is that you can get a lot closer to the action.

If you are the type of person who wants to be part of your investment you can find a startup that will be very happy for your time contribution as much as your cash input, this way you can learn more and be closer to your money!

Diversification

Diversification is one timeless rule that must be adhered too on a daily basis when looking at investing in start-up business because on average you invest in three start-ups, one crashes and burns along with your cash, one drags its heels holds its value but you could get your pension before they make it big, and one will make you a lot of money.

This is what make private Placements or Private equity one of the most exciting areas for investors especially when you can get really close to the owners of some of the business you invest in and be part of their success on a daily basis.

Many successful startup investors specialize in one field and invest in a portfolio of startups in their field only. They like to be an integral part of their investments and their knowledge and network is as valuable to the start up as their capital.

Expect some resistance from traditionalists

“Why the hell are you investing in Goldfish socks??”

Biz-find Traditional investors

Startup investment is a very new branch of investing, and all you have is a hunch, not the type of investment hard core traditionalists can stomach. There are no mathematical equations you can use, Macro politics and economics will probably not be much use to you, and watching Bloomberg all day will probably make you paranoid.

Some startups are so ground floor a Bank will never understand their crazy concept or flimsy business plan as High Street financial institutions are heavily reliant on numbers and a two year minimum order book, where Investors rely on hunches. So the fact that a bank has refused them does not always mean they are a bad bet.

Yet the fact they don’t have an investment deck, or have even registered or patented the name of their invention yet, is a massive opportunity to you as you know your investment is rock bottom price and the opportunity for growth is what excites so much.

Follow each opportunity to the end

Successful startup investors never ever dismiss out of hand any idea as they know every stream leads to the Ocean and although you may dismiss many ideas for many reasons, but one idea can always lead you to the next great business idea.

Biz-find is at that stage whereby we are bursting at the seams and a few more people will be our lucky investors in the online B2B lead referral market.

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