The interest for startups is constantly growing and more and more people are interested in investing in startups. Success stories about people who invested early and experienced a successful exit are getting a lot of attention. Moreover, famous people like Ashton Kutcher and Zlatan Ibrahimovic are investing in early stage companies, which brings focus from mainstream media. What are the steps for start investing?
Firstly, it is important to have enough investable capital. Most angels provide capital in the range between SEK 200 000 and 2 000 000 per company. To get a good diversification and thus lower the risk, an investor is recommended to invest in more than one company. Some experts recommend that 10-20 % of one’s assets should be placed in startups. In conclusion, you should only invest as much as you are ready to lose.
Secondly, investors should be informed about the risks regarding startup investment. This type of investment is highly illiquid and it can take as long as five to ten years before you see your money again - if you ever do. What still motivates many investors is the high growth in the startups market in general with many success stories that inspires investors.
Thirdly, it can be a good plan to consider what value you can bring to the company. Except money, many angel investors provide their competence and network to help the startup. This is sometimes called “smart money” which means that your background and contacts becomes an asset that can help the startup move forward. Consider for example the industries you have worked within or what you have big interest in and make it you niche.
Finally, it is a good idea to join different networks of other investors. It could be everything from forums to Facebook groups and different meetups. Qalora, our own company, is an example of such a network. At Qalora, investors can become members and through afterworks and dinners meet other investors that you could potentially syndicate with.