How to Invest in a New Start-Up Business
Your investment portfolio is likely filled with large corporations, with little interest in individual shareholders. You can reconnect with the business world while earning a dividend by investing in start-up businesses. Most start-ups require small amounts of money in early stages for production, payroll and promotional campaigns. Your role as an investor does not stop once the check clears. Start-up businesses rely on their investors to act as advocates during the search for additional funding.
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Instructions
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Spend Your Money Wisely on Startup Businesses
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Narrow your start-up investment choices by attending conferences in your industry of interest. The rapid growth of high-tech firms has made conferences like TechCrunch popular among investors. Collect brochures and speak directly with start-up owners to find out if this particular industry is right for your investment profile.
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Ask for business plans, sample products and presentations from start-up owners to find the right investment. Look for profit expectations, timetables and previous funding in business plans to determine if a business has a realistic vision of the future.
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Feel comfortable with a start-up venture's products and services before investing your money. Test out software demos and sample products to determine if you like the product in question. Conduct informal product testing by letting friends and family members play with samples.
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Examine the competition for potential start-up investments before writing your first check. New ventures in the automotive, construction and software industries face high competition, which decreases opportunities for success. Figure out if a business has found an undiscovered niche that would trump major competitors.
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Balance your desire for input with the potential profit available from a start-up business. Young companies with little funding may value your advice more than established companies with thousands of investors. Avoid meddling in your own investments by only offering advice in areas of the start-up business where you have expertise.
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Stay ahead of fellow investors by looking beyond hot trends for the next big industry. Review start-ups in trendy areas like wind turbines, social networking and organic farming to find products that will last beyond the hype.
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Act as a cheerleader for your start-up investment to get higher returns down the road. Write testimonials about the company's products for its website and recommend products in your community when applicable. Participate in discussions with venture capital funds and large investors when asked for assistance by start-up owners.
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Tips & Warnings
Ask owners for information on past venture capital funding and individual investments before choosing a business investment. Steer clear of start-ups that have squandered venture capital, sought extensive loans and maintain spotty records of monthly expenses.
Temper your desire to draw money from retirement accounts and credit cards as you invest in start-up businesses. Shift investment money from stocks and government bonds to start-up companies to reduce your financial risk.
Resources
- Photo Credit Photo by cobalt123 (Flickr)
