Entrepreneur Resources Your source for small business information
Investing in start-ups can be a minefield. The rewards are there to be had but be warned, rolling the dice on entrepreneur investing can be hazardous to even the most seasoned veterans of the investment game. Unlike investing in established businesses where there is a financial history available for inspection, the start-up game is littered with what-ifs and possibilities. Don’t let this dissuade you completely though, if you make the right decisions investing in entrepreneurs can be financially and personally rewarding. Knowing that you are contributing not only to someone’s personal and professional success but also contributing to the economy can be a very rewarding feeling.
As with any kind of investing, research could be the difference between success and failure. This is where professional advice could be invaluable, available from companies such as CMC Markets. Knowledge is power and when you are investing your money then the more knowledge you have at your disposal the better equipped you will be to deal with the sometimes turbulent world of start-up investing. Analysing the competition and the marketplace will have numerous benefits for your investment and if you have even a working knowledge of the industry you will be far better placed to make the decision on where to invest. Here are some tips that may help you navigate your way through the world of entrepreneur investments.
Knowledge and research are vitally important, so if you invest in an area in which you have prior knowledge then you are already one step ahead of some investors. If you have a background in I.T. then a fledgling software company could be the right choice and your knowledge of the field will help you to analyse the possibility of a healthy return on your investment. Each field has its own inherent risk factors but as with so much in life, the higher the risk the higher the potential reward.
There are websites that can help you discern which start-ups are viable and which are best avoided. A simple Google search will lead you in the direction of of those in the know.
Equity crowdfunding platforms can be another option for those looking to invest online. If you are finding it difficult to find deals then registering on investment platforms will help you to find more options for investment.
If you are planning on investing in a start-up then you may need to meet the criteria of an accredited investor. Definitions of an accredited investor vary between countries, legally speaking, but they generally share the characteristics of being a high net worth individual or institution who have access to some higher risk investments. This effectively protects potential investors from risk as they will have experience of investing.
The people involved in the enterprise are a key aspect to consider when deciding whether to invest or not. They will be the ones running the business and they will be holding your money in their hands so finding out about the team is imperative. Are they honest, do they work well together and do they have a clear and coherent vision for their business, these are all things that need to be addressed prior to investing.
The financial rewards are there to be had but never forget that start-ups have a high failure rate and you could easily see your money disappear into a black hole of creditors. The old adage, never invest more than you can afford to lose is more true for start-ups than any other kind of investing. With some start-ups the return will be relatively small as the directors focus on reinvestment over dividends. While this will reduce your return in the short-term, long-term it could make a considerable difference to the money you see at the end of the venture.
All-in-all, investing in entrepreneurs is by no means a sure bet and it comes with its own set of pitfalls along the way. Research, judgement and a clear head are tools that are needed for any investment opportunity and perhaps more so when investing in entrepreneurs. The possibility of investing in the next Google or Facebook is enticing for those with the money to spend and with the right decisions it is entirely possible that you could be the next one to ride the coat-tails of the latest start-up success story.
