How to invest in startups

There are a lot of stories about successful startups that made their investors rich. Thus, investing in startups is on the rise. There are two main sides in startups – the founder and the investor. The first has an idea and wants to find financial recourses for its accomplishment. The second has the money and wants to multiply it by investing. At the point of their meeting, the project starts active development.

How to find a startup to invest to?

Startups can get investments in five common ways:

  1. State and institutional programs.
  2. Crowdfunding companies.
  3. ICO (Initial coin offering).
  4. Startup seed accelerators.
  5. Venture Capital companies.

As an investor, you can choose the way you like more and use it. You can be a VC company and meet startups at different conferences where startups present their products and ideas. These events allow finding an interesting startup for you to invest into. When the company position itself as a VC, startups often find it themselves.

Also, you can find interesting projects on crowdfunding platforms like Kickstarter, IndieGoGo, AngelList and others. These platforms allow startup founders to present their projects and find people who want to donate to these projects. Usually, donators receive some benefits like early access to the product, first samples of the product, official merchandise, etc. Founders specify the sum they need to start the project.  You can invest in one of these startups all the sum and become a sole investor.

How to find startups to invest in?

Lots of investors ask how to invest in tech startups or how to invest in blockchain startups. Actually, regardless of the startup area, there are a few common things you should pay attention to.

  1. Technical background. Startups’ founders are totally passioned about their products. Unfortunately, idea and passion can’t be the main reason to invest. You should see the foundation of this idea. Proof of Concept (PoC), for example, will be a good reason to invest. You should check the efficiency of the idea. To do that you need to have in-house specialists or hire the independent consulting team. A good practice is to refer to the Managed Service Provider (MSP) who has experience with startups. MSP can help both investors and startup founders: startups – to make PoC, investors – to check PoC quality and viability. If you have strong faith in the project and want to help startup not only financially, you might offer startup owner services of your MSP or find an MSP if you haven’t got an appropriate team.
  2. Startup team. You need to make sure the project will be accomplished. It means you should get acquainted with the startup’s team and make sure that the team is competent. Sometimes startups consist of two or three people and want to produce the project in outsourcing. In the early stages, the team can be small, but it’s strange when one person writes code, supports the users and makes a marketing strategy.
  3. Speed. Take a look at the project speed. How long is startup going and what results do they have at the moment? What is their traction with the target audience? Besides speed, team efficiency is important. For example, it doesn’t matter that the team writes 100 code lines per hour if the code doesn’t work appropriately. 
  4. Market. As an investor, you should estimate the market and demand for future product. Keeping abreast of user requests will be a huge plus, as you will see if the feedback is applied. Thus, you will have the ability to predict project success.

Conclusion: startup for investors or investors for the startup?

In the case of successful projects, investing is a win-win process. Startup gets money for development and investor gets profit after startup succeeds. As a result, we have mutually beneficial cooperation. So, startups need investors and investors need startups.