Brief startup investment guide for first-time investors

| December 11, 2018
Brief Startup Investment Guide for First-Time Investors

When looking for an amazing investment opportunity, the majority of people look for a revolutionary idea. The problem with this approach, however, lies in the fact that even the best of ideas can fail. In fact, the history of the business world is filled with startups that had an amazing idea, yet, somehow still managed to fail. This was either due to the poor execution or the fact that someone launched something similar, yet superior, soon after. Here’s how you can avoid this pitfall and recognize a good investment opportunity when you encounter it.

1.      Investing in the team

The reason why such an idea may be worth your while is due to the fact that it doesn’t require you to know the peculiarities of the industry. Instead, you can get by with knowing basic inter-human relations. This means that if you’ve ever worked in a collective or know the first thing about them, you’ll be able to recognize a great team. One of the biggest problems with this theory lies in the fact that people often confuse team with leadership. This means that they do a brief investigation of the personal brand of the SEO or even the entire senior management. Then, if they like what they see, they decide to invest. Nonetheless, this is a small (and chosen) sample group, which is why it may not be representative.

Brief Startup Investment Guide for First-Time Investors

2.      Having the right qualities

Even though it’s impossible to say if the team will make it, what you can do is determine whether it has all the qualities to succeed. This is not the same thing, seeing as how the latter mostly determines the potential of the company. For instance, the idea needs to be resilient to change, due to the fact that most ideas that work only within a limited set of circumstances don’t last long. Other than this, it needs to have networkability, meaning that it has many sides to turn to in the moment of crisis. Finally, there needs to be a charisma behind an idea, which is something that can be sensed right away. If the team itself seems to doubt the idea, it’s unlikely that the investment will be a successful one.

3.      Get your information from trusted sources

The biggest problem with following advice from the internet lies in the fact that you don’t know whose words you’re living by. For instance, just because you’ve encountered a name of the startup on the list of potentially lucrative investments, this doesn’t mean that it’s an investment actually worth considering. Still, these resources aren’t universal or credible but are instead, niched. So, if you decide to invest in small cap stocks, you will have to find a top 100 list that you can sort by various metrics. We’re talking about the name of the company (alphabetically), their ASX code, their price change for the last year and their market cap. In this way, you can get informed fairly quickly and methodically.

4.      Recurring revenue

This may sound like a bit of a stretch, yet, you need to find a company that boasts with a recurring revenue. For instance, a service that runs on a subscription fee has a profit determined by the number of subscribers. Of course, we’re not suggesting that a company with a tad more unpredictable revenue may be less reliable, only that a simpler business model may be easier to understand. Once again, the understanding of the small business model won’t determine its income or its successfulness but it may impact your ability to make the right choice. This is particularly important if you aim to make multiple investments.

Brief Startup Investment Guide for First-Time Investors

5.      Find the right platform

In the 21st century, it’s much easier to invest via a platform than to do so the old-fashioned way. Sure, the old-fashioned way is still more reliable, seeing as how you get to do more research and establish a personal link with the management. The problem, however, lies in the fact that you might miss out on some amazing investment opportunities simply because you haven’t encountered them. With platforms, this is automated and systemic, which minimizes a chance that you’ll miss out on a potentially lucrative investment in the right category. With tools like OurCrowd, Angle Kings and WeFunder, you get to explore many new and exciting options.

6.      Uncertain regulatory environment

At the end of the day, you need to understand that regulation greatly limits the potential growth of a startup or an industry. This is mostly why the phenomenon that the companies that enter the industry early on tend to meet the greatest success is true. The problem with companies in such an environment lies in the fact that you don’t know the effect that these regulations are going to have on them retroactively. Sure, things might turn out for the best, yet, the only way to know this is to risk it. In other words, if you’re going to risk for a great profit, it’s better to look for a new industry than a new company.

Brief Startup Investment Guide for First-Time Investors


As you can see, everything from leadership to the market determines the odds of your business. Nonetheless, you need to accept the idea that you’ll never be able to be 100 percent sure that the choice that you’ve made was the right one. With these tips on your side, nonetheless, the odds will be in your favor.