You don’t need a lot of money to invest in a start-up which is what makes it one of the more accessible forms of business investment. For the most part, the people that invest in start-ups are just trying to support and get in on a business that they believe in. It is worth mentioning that start-ups are classed as high-risk investments. If you are willing to take the risk, read on for all the info you need to invest in start-up businesses.
Double Check the Legality
Before you commit to investing in a start-up or any business in its early stages, you should look it over from a legal standpoint. As a potential investor, you need to know how the company is incorporated, whether the contacts are in order and how shares are issued. So always do your homework and make sure all of your questions are answered.
Research the Owners/Founders
If it’s possible, you might want to try and meet them in person because when you invest in a fledgling business, you are investing in the people behind it as much as the business itself. However, if a meeting is not possible or feasible for whatever reason, then you should do some research into the people behind the company instead. You want to make sure that the people behind the business have integrity, that they are reliable and honest.
Check the Maths
Most of the time, when the owners of a start-up tell you how much the company is worth, they will be making an educated guess. You should always try to verify that valuation and double-check their maths. You need to make sure their numbers add up.
Understand the Risks
Unfortunately, some businesses fail in their infancy, and as an investor, you need to be aware of the risks before you commit any of your money to a business. Ideally, you should never invest more money than you are willing to lose. It is all about hoping for the best but preparing for the worst.
Consult a Professional
If you are not particularly well versed in the world of investments or if you aren’t confident, then you can always seek the help of an investment manager. You can find someone to look over your options and help you choose. Or you can employ the services of a business like Oxford Capital; they invest their clients’ funds for them, they can do the work for you and provide you with access to a portfolio of early-stage businesses from some of the UK’s leading sectors.
Playing the long game
One of the key things to be aware of as an investor is that when investing in an early-stage business, it can be difficult to get your money back since it is regarded as an ‘illiquid investment’. This means that assets cannot be quickly returned. You may love the idea of a fledgling business, however, it must be kept at the forefront that it could take years to see any potential return, this must be considered when weighing up the potential risks.
In the End
Investing in start-ups can be risky, but you can negate some of this risk by making sure that you are properly prepared. Although there is a lot that you need to do before you should feel comfortable handing your money over, make sure that you bear this in mind while looking for your next investment opportunities.