How to Invest in Startups in 2020

Most average investors would rather put their money on an old company rather than invest in a startup. Startups are not allowed to go public yet until after they are at least two years old with a market value of $1 million. The reason for this is to let the startup grow to a particular level, and has a proper business structure on the ground before opening up to public investors and stakeholders. Startups can still attract investments at its level, but private investors such as family, friends, wealthy investors, or institutional investors. As a private investor considering investing in a startup there are a few things to note before taking any step further. First things first, not all startups do badly within the first two years. As a matter of fact, some startups hold so many potentials to yield good returns by the end of the first year.

Have a meeting with the founders: Before deciding whether or not you would like to commit your money to a new business, rather than act based on what you have heard about them create an avenue to meet with them. Meeting with them would help you properly understand their drive, motivation, or passion towards the startup. Hearing them speak about the company would help you discern how serious they are about the business, and what the future holds for it. Almost anyone starting a new company and in need of funds can present a well-rehearsed business plan to potential investors; however, it takes attentive investors to raise vital observations that may likely influence the overall performance of the company in the future.

Work with customer reviews: It is expected that the startup should have gained some entrance into the market, therefore, have existing customers. Looking out for what customers are saying about the company’s products or services tells that the company has gained traction into the market which can be built upon. That way, you are not just putting in your money, but sure to a certain level that in a matter of time company’s services will gain widespread. 

Review the company’s business plan: As a new company, the figures in its financial statement may not be so mind-boggling, however, a good look at its business plan would reveal a lot about where the startup hopes to be financially in the nearest future. You may also want to properly run the numbers to be sure that you are making the right decision.

Proceed with due diligence: If you feel a selected startup interests you a lot, and would like to invest in it after meeting with the founders and checking the market performance you may want to tighten things a bit through due diligence. Request for the company’s paperwork—financial reports, balance sheets, contracts, lease agreements, and other relevant corporate records. Note that a company wouldn’t simply hand over sensitive company materials to you if you remain unsure about your motive towards it. Getting to the due diligence stage shows some level of commitment, and most companies would require that you sign a non-disclosure agreement, should in case you are no longer interested in proceeding with the investment.

Tip: The above-stated requirement works best with institutional and wealthy investors seeking to invest on a large scale. For the small or average investor, crowdfunding is a good way to invest in startups. 

List of website that allows people to invest in startups 

Equityzen Equityzen is for accredited investors only.  An accredited investor is someone or a business that is allowed to deal or invest in securities that are not registered with financial companies.  A person or the business have to meet certain requirements before qualifying to be an accredited investor. 

In other to qualify as an accredited investor, the person must earn an annual income of about $200,000 to $300,000 in joint income for more than 2 years. Also, for a  business entity to qualify for an accredited investor tittle, it must  have assets that exceed $ 5 million. 

SeedInvest : SeedInvest is for both accredited and non accredited investors. it's a crowd funding website where vetted and unvetted startup go to raise fund.