As a fact of the matter, investing in startups is a chancy game for all new investors. The only way to success in startup investing is to play strategically and to do so, you need to learn the craft from scratch. By playing strategically, you do not just win, but also get hands on expertise in the craft of startup investing which grows as a diverse investment portfolio overtime.
By looking at the past records of some of the most successful startup investors you’ll find that didn’t achieve success overnight; they didn’t just worked hard, but also worked smart to make their investments more fruitful.
As a new investor, you may be looking for something large and growing market, but that’s not startup investing best practice. Here are some important points for new investors to consider.
1- To start with you should look for ideas that fall under your domain of expertise, so you can evaluate them well.
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2- Make sure that the idea has provable product need.
3- Focus on startups that have a scalable business model.
4- Look for ideas that have a real competitive advantage.
5- Invest in ideas with reasonable valuation.
6- Look for startups with highly productive team.
7- Make sure that the startup has a fool proof business plan.
It may sound a bit out of the way to a new investor, but seasoned investors suggest meeting and knowing the founders in person. Since, the founder is the person you are going to bet on, it’s important to evaluate him under a stringent criteria. Here are the attributes to look for in founder:
8- Honesty and integrity.
9- Passion to take the startup to next level.
10- Highly knowledgeable with all operating skills.
11- Leadership ability to drive the team.
12- Self-motivated with long-term, extensive vision.
13- Realistic yet optimistic.
14- Good listener; especially when it comes to listen to investors.
15- Be able to effectively handle crisis.
The Bottom Line:
To become a successful angel investor, you need to know what experienced and successful angel investors look for in a startup and so you should do the same. To sum it up, remember this quick list:
- The skills, knowledge, passion, commitment, and integrity of the founders.
- The market opportunity being addressed and the potential for the company to become very big.
- A clear business plan with evidence of obtaining traction toward the plan.
- An appropriate valuation with reasonable terms.
- The capability of raising additional funding rounds.