Over 50 million startups are created each year, and only about 10% of them survive the first year. Among the startups that do survive the first year, about 70% of them closes down within the first ten years. These data scares people away from investing in startups even if the startup idea is unique and looks profitable.
Even though startup investing is risky, it is important to note that successful companies like Facebook, Tesla, etc. were startups once and they too were deemed risky to make any profits. If you are someone who is interested in investing in potential startups, then you need to do some homework before making investments so as to increases the chances of profitability out of your investment in the future.
To help you out, we are here with a list of guidelines you can follow in order to make startup investments that can provide you with a better guarantee of profit for your investment.
Choose Startups with a Proper Business Plan
In today’s world, having an idea and launching a startup is an easy task that requires very little to no investments. However, an idea cannot always guarantee stability and profits in a business. While choosing a startup to invest in, the most important point to consider is whether the startup has a proper business plan laid out. A proper business plan for a startup includes having fixed and achievable short-term goals along with information related to business scaling in the near future.
Startups having a business plan laid out makes it easier for investors to analyse the potential of the business and startups that have a business plan laid out are more likely to succeed than others. It is also important for investors to keep a check on whether the startup has been able to reach their previous short-term goals to ensure operational efficiency.
The introduction of blockchain-backed investment platforms has made it quite easier for investors to deeply analyse the short-term and long-term goals of a business and also keep an eye on their use of existing funds before making an investment.
Research About the Team
The core team behind a startup is as important as the startup idea. Startup founders have huge responsibilities on them, and a startup can only succeed if the founding team is up for accepting and resolving challenges. Therefore, before making a startup investment, it is really important that take a look at the people responsible for the working of the startup. By taking a look, we mean researching about the previous startup history, educational qualifications, previous employment and so on. This will help you as an investor to understand the potential of the people running the startup and what their company will most likely bring to the table in the future.
Never Put All Your Eggs in One Basket
Regardless of how attractive a startup is or how much you trust the startup, it is never a good idea to put in all of your investment budgets in a single startup. Even though it may increase your profit margin, the chances of you losing your money are also high.
Try to diversify your investment as it will reduce your risk of losing money and will also increase your chances or profit. However, it is essential that you choose startups in domains that you have a basic idea about. This will not only help you in analysing the future potential of the business but will also help you to take out your investments anytime you feel that something is not right.
Look Out for Startups Abroad As Well
The startup ecosystem is being developed all over the world, and potential startups are existing around the world. For investors especially in developed countries, it is highly profitable to invest in startups overseas especially in emerging economies as the funding requirements are comparatively low and the chances of profitability are high.
Even though it has never been easy for amateur and individual investors to make investments in foreign countries due to geopolitical reasons, blockchain-backed platforms have made it easier than ever before. Blockchain platforms that connect investors and startups make it easier for investors to fund and for startups to accept them legally without breaking any foreign investment policies with the help of tokenization.
Not All Startups Generate Profits Equally
One major mistake that most investors do is to invest in startups with the hope of profit returns shortly. Well, even though there are startups that start generating profits within the first couple of years, there are startups that start making profits after ten years or more as well. Not all startups generate revenue or profits equally, and some startups are more like visions for the future than current market opportunities.
Before investing in any startup, you should have a clear idea about your expectations from the investment as it will help you in picking the right startup for your investment goals.