How to Invest In Startups – 5 Experts Weigh In
If you invest in the proper startup, you may be able to retire when the company goes public. You may also lose 100% of your investment.
Finding a standard definition for a startup can be difficult and depends on who you ask. A several-year-old and profitable business can be referred to correctly as a startup. A company that has not earned a dollar in revenue can also be considered a startup.
There are also differences between types of startups. A seed-stage venture will look very different from a series E and above. Each company targets various industries and has other end goals.
Before adding startups to your investment portfolio, you must look at several factors. Darren Hazan, a Crowdfunding Expert at DarrenHazan.com, gives three considerations you should consider before investing in startups.
Suppose the startup is primarily raising capital due to a popular culture moment that is a reason to tap the brakes on your investment. Cultural trends come and go.
Is the startup building something based on a trend (say smart toilet seats) or a long-term movement (environmental awareness)?
If this is the founder's first time with a startup, that could be a reason to think twice about the particular company. Investment opportunities based solely on projections without previous success are very high risk, and no security is offered.
Have the CEO, Founder, Directors, etc., created a startup before, and do they have a track record of success? Have they successfully exited?
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