Every single business is considered a start-up. The meaning of which is that in the start-up stage, a business is considered to be at its riskiest stage. However, there are several start-ups that have the potential to become great investment choices. “When Facebook and Amazon were at the start-up stage, they were considered risky”, says Entrepreneur and investor Saar Pilosof. “But those investors who had the foresight to invest in the early stages, would have ended up making winning investment choices and would have profited from their investments in the long run. The key to investing in start-ups is being able to identify long-term income potential in a business”.
You may start your search for start-ups that require investors by using venture investing platforms, by attending events where start-ups pitch their business ideas, by speaking with entrepreneurs, colleagues and other acquaintances, friends and relatives. Once a potential business is identified, you should begin to carefully examine the business plan to satisfy yourself that the proposed business is sustainable and that the business is likely to generate sufficient income to cover attractive investment returns.
Apart from scrutinizing the finances, you must also ensure that the marketing plan is solid. Ideally, investors should invest in businesses whose primary field they have significant knowledge about. For example, a teacher may choose to invest in an online school start-up. By doing so, the investor may be able to offer guidance in the future if that is the investment arrangement. Also, your start-up choice should fit into your overall portfolio goals. Remember that portfolio diversification is important as a risk-mitigating strategy so even though you want to invest in businesses that you may know something about, diversify across several different industries by allocating smaller portions of your portfolio to other business areas. Investing in start-ups can be tedious, but if you choose the right ones, it can be a very rewarding undertaking.