Modern Australian
Men's Weekly

.

Investing in local start-ups: what you need to know

  • Written by News Company


Investing in a new, growing company or a start-up can be a great opportunity. As well as the possibility of making substantial profits as the company succeeds and expands, you will be helping a small Australian business get off the ground and will have the satisfaction of knowing you were there from the beginning as your team goes up in the world.

However, there's no denying that investing in a start-up also carries a significant risk. The sad fact is that most start-ups don't make it, and many cease trading within the first year. As an investor, you have to face the strong possibility that rather than make money you could stand to lose the amount you put in. At the same time there are ways to minimise that risk, and to give yourself the best chance of backing a start-up that is going to be successful and return a decent profit.

 

Don't put all your eggs in one basket

First of all, there's the advice that every good investor should know by heart: diversify. Because start-ups are such a high-risk investment, it makes sense to invest in several rather than just one. Three out of five may fail, but two may succeed to the extent that you are still ahead overall. Obviously, you should invest in companies operating in different fields. This will give you a more balanced spread, and also ensures that your companies aren't in competition with each other.

 

Different ways to invest

The most obvious way to invest in a start-up is to buy shares in the company, but new businesses aren't listed on the stock market. A popular contemporary alternative way for start-ups to raise seed capital is through crowdfunding, but crowdfunding platforms don't always offer the best returns for the investor.

The Australian Investment Network puts investors and entrepreneurs together, hopefully ensuring the right combination for long-term success. There are many other platforms that allow you to go in as an "angel investor". You could also work with a professional venture capitalist that will do the legwork on your behalf and invest your funds for you. This can be the safest way to proceed but it is somewhat impersonal.

It's also possible to make investments without having to actually buy into the underlying property, using CFDs. Make sure you find out exactly what are CFDs before proceeding down that route however.

 

Do your research

Assuming you want to invest in a start-up directly, the next thing to do is to think about what area of business you'd like to invest in. It makes sense to choose a sector you already have an interest in and some knowledge of. It may be an emerging field, in which case you should investigate the size of the market and its potential for growth.

 

Look for something unique

A good start-up should offer a unique product that will really make a difference in its chosen field. Ask what makes them different, how their product or service can improve the experience of potential customers, and how it can be effectively monetized. Check out the competition- what gives your start-up the edge? How can their product or service be developed over the long term?

 

Meet the team

Once you're satisfied that the start-up has a great idea at its heart, it's time to meet the team behind it. Check out their track record, their skills and history, but also make a point of meeting them face to face and getting a real sense of what they are like as people. A good idea with bad management is a bad investment: you need to know that you're backing a team with the vision, experience, skills and self-discipline to make it work.

 

Look over the business plan

Ask to see a detailed business plan and go over it thoroughly. The start-up should have a clear vision of how it is going to progress and make a profit, and where it intends to be in ten years' time. Look over the legal documents and get expert advice. Be clear about your exit strategy: what happens when you want to sell your stake? It's easy to get swept up in the enthusiasm of the initial pitch, but remember it is a pitch. Enthusiasm and passion from the managers are vital, but so is a solid plan and disciplined focus.

 

When it all goes right, being an early stage investor is a great feeling and also a way to make impressive profits. But remember that this is a high-risk area and not one to go into without due diligence and caution. Pick your team well, do thorough research, get good advice and maintain a varied portfolio, and you'll have as good a chance of success as anyone.

Business

Building a Governance Model for Headless Content Management at Scale

Image by pch.vector on Freepik There's never been a better time to implement a headless content management system (CMS) to gain the flexibility and scalability necessary for developing digital experiences...

Understanding Trade Insurance: Essential Protection for Businesses

Image by Drazen Zigic on Freepik In the current economic environment, trade insurance is an important element for companies trading both locally and internationally. This is a type of insurance that reduces...

Navigating the Digital Landscape: Managed IT Solutions and IT Services in Townsville

As technology advances at an unprecedented pace, companies must adapt to embrace the transformation ahead. With an evolving technology landscape, managing technology effectively is a strategic priority for every North...

Maximising Operational Efficiency: Electric Winch Hire Australia and Hydraulic Power Pack Hire Solutions

Image by jcomp on Freepik From urban construction sites and remote mining operations to coastal maritime facilities, specialised equipment solutions are integral across Australia's varying industrial landscape to deliver project success...

Designing Secure Content APIs in Headless CMS Environments

APIs are what enable content to be delivered from a headless CMS to anywhere digital content can exist from websites and apps to IoT and more. Yet while the headless...

The Role of Mining Equipment Suppliers in the Industry

Mining is one of the most essential industries, driving the global economy by providing raw materials for manufacturing, energy production, and infrastructure development. Behind every successful mining operation lies an...

Building a Governance Model for Headless Content Management at Scale

Image by pch.vector on Freepik There's never been a better time to implement a headless content management system (CMS) to gain the flexibility and ...

Understanding Trade Insurance: Essential Protection for Businesses

Image by Drazen Zigic on Freepik In the current economic environment, trade insurance is an important element for companies trading both locally an...

Choosing the Right Timber for External Cladding

Timber cladding is one of those finishes that pulls double duty: it makes a building look warm and welcoming, and it quietly shields the frame from ...

Top Services Offered by Diesel Mechanics in Brisbane

Keeping a diesel vehicle running at its best takes more than the occasional oil change. When you invest in regular specialist care, you protect the ...

Top 5 Benefits of Hiring Professional House Removalists

Moving day should feel like the start of a new adventure, not the end of your patience. Yet once the settlement papers are signed and the champagne ...

Navigating the Digital Landscape: Managed IT Solutions and IT Services in Townsville

As technology advances at an unprecedented pace, companies must adapt to embrace the transformation ahead. With an evolving technology landscape, mana...

Types of Catering You Should Consider for Your Next Event

Choosing the right type of catering service can elevate your event from ordinary to unforgettable. Whether it’s an elegant wedding, corporate func...

Understanding the Benefits of Split System Installation for Your Home

Climate control is essential to maintaining comfort in your home, especially during the extreme temperatures that many regions face. Whether you’r...

Best Aluminium Window Sliding Designs for Natural Light and Airflow

Bringing natural light and airflow into a space is one of the most efficient ways to create a healthy and comfortable home. In Sydney and across Aus...

Maximising Operational Efficiency: Electric Winch Hire Australia and Hydraulic Power Pack Hire Solutions

Image by jcomp on Freepik From urban construction sites and remote mining operations to coastal maritime facilities, specialised equipment solutio...

Navigating the System: Your Guide to Support Finding Work with a Disability Around Melbourne

Image by freepik Finding the right job can be a challenge for anyone, but it can feel particularly daunting when you're also navigating life with a ...

Say Goodbye to Draughts and Hello to Savings: Your Guide to Perth Window Replacement

Image by prostooleh on Freepik Are your windows looking worse for wear? Are you paying a hefty power bill due to sneaky draughts and poor insulation...

How to Choose the Right Horse Trailer for Your Riding Needs

Many horse owners travel long distances for riding lessons, competitions, or to move horses between properties. Having a safe and reliable trailer i...

Sydney Turf Installer for Instant Green Lawns and Long-Term Performance

Having a green lawn at home makes everything look better. Whether it’s the front yard, backyard, or a small patch beside the driveway, people in S...

Designing Better Living Spaces: Why New Kitchens in the Blue Mountains Are in High Demand

The Blue Mountains region is seeing a steady rise in home upgrades. According to recent housing data, kitchen renovations remain one of the most req...

The Role of Packaging Manufacturers in Reducing Supply Chain Costs

In today’s fast-paced logistics and distribution landscape, businesses are under constant pressure to optimise operations and reduce expenses. One...

Customising Roller Shutters for Warehouses, Factories, and Logistics Hubs

In today’s fast-paced industrial and commercial environments, security, functionality, and efficiency are paramount. Whether you manage a busy log...

Top Fire Hazards in Commercial Buildings and How to Avoid Them

When it comes to protecting lives, assets, and business continuity, fire safety should be at the forefront of every commercial property owner’s ri...