Investing in startups are risky but at the same time startups offer the potential for bonanza of returns that are totally unmatched by the returns from any other investment sources. If you’ve decided to invest in this ecosystem, get a kick start from smaller amounts to the higher ones.
There are many ways of investing in startups having their own pros & cons. One of the popular & coherent way is joining an Angel Network. Some of the things you’ve to confirm before joining an Angel Network – examine the meeting frequencies, network having national & international coverage to access the enormous opportunities, in house team capabilities with proper monitoring & supporting the startup in further rounds. One of the main advantage of joining a network is investments are made in a pool so you can make meaningful contribution to the startup with smaller amounts & due diligence, post investment monitoring , documentation, proper evaluation with finding companies with decent tractions & unique ideas are done by the them. Investors just need to think about the decisions for entry & exit parameters.
Some of the other ways are syndicates, which is a fund created to make a single investment.
Let us understand the different stages of Startup funding;
Self funding capital – At this very few complexities & documentation are involved in which entrepreneur contributes from his/her pockets.
Another comes to be is Seed Capital , this funding helps in identifying direction for the startup and to formulate product for the company. Mostly raised from friends,family, mentors & from angel networks.
When the startup reaches the market to its final product & service it requires Venture funding which involves series rounds:
Series A funding is mostly used to tapping new markets and in marketing campaigns , helping the startup to grow.
Series B funding helps businesses in establishing more infrastructure, hiring staffs and helps in becoming a global player.
However a startup can receive multiple rounds but the only caution is dilution of business equity. There has been a decent increase in Venture capital funding of startups in 2020 i.e. 14% from 2019 despite amid pandemic as technology startups gained traction. This year has been a great boom for Startups as 225 companies ticked upto unicorns this year in United states.
So an appropriate way to start investments is none another than joining an angel network & Don’t forget to follow the golden rule of not putting all the eggs in the same basket & try diversification.