Industry secrets to know before you invest in a startup
The Editorial Staff
Though a startup is an exciting venture and the lifeblood of an entrepreneur, there are industry secrets to know before you invest in it.
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Before we get into the meat of that which you need to know for investing in a startup, let’s preface the article by saying this. We will not rain on your startup parade. We want you to look at investing in your first startup as an adventure. It’s the attitude that true entrepreneurs have.
Most of the excellent reading material about entrepreneurs will describe them as people who think proactively and people who innovate. They also you delegate when necessary.
Funding for the new startup entrepreneur
Whether you’re a new entrepreneur or one that has a few years' experience, it can still be difficult to get funding for your startup. Banks are still leery, so don’t take it personally.
Great opportunities await the startup with innovative ideas
Most entrepreneurs get their funding from friends and family. This is a winning proposition as long as you agree crystal clear. And yes, a written legal agreement is necessary in these cases too.
Research the startup opportunity
So what happens when people find out you’re a new entrepreneur and you’re approached with an opportunity? You may be naïve to figure out the risk. Chances are, a friend or family member wants to turn an inspiration into a business.
The most common opportunities are people you know that want to open something like a restaurant. Whatever the reason is and regardless of who the person is, you need to think about the reasons you are being approached. Why does the opportunity exist in the first place?
More times than not, someone needs money. They want you to invest. Even if you can do it, take some time to ask questions and sleep on it. One of the most important things you should find out is why they need the money.
If a bank turns you down, be tactful and inquire about the reason. You don’t want to invest in a doomed business, but you should also recognize that just because they didn’t get a loan doesn’t mean it’s a failing business.
Counting chickens before they hatch
Be aware that investing in a startup that has fantastic potential may not show returns for years. In order to keep that potential going, you may have to put profit back in the system for a while. You’ll have a guaranteed income stream if you invest via a loan with a determined term.
Startup exit-strategy
The exit-strategy is as important as buying in. It’s something that we should discuss and document. This assures you that you have a plan to liquidate should you decide the company is not going the way you envisioned or you’ve simply decided the business no longer resonates with you.
A startup is an exciting venture is the passion and lifeblood of the entrepreneur. It lives for the next opportunity. It’s a dangerous and edgy world—the way it’s supposed to be. Do it right and be a part of a fast growing and popular career.
The Editorial Staff
The Editorial Staff at The Business Frontal is a team of writers dedicated to bringing seasoned news stories and how-to business articles to our readers and patrons to help maximize their entrepreneurial potentials.
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