6 Things that Investors Need to Check Before Investing in a Startup

If you are an angel investor or learning about angel investing, you are aware of how “scaled-up” startups can bring scaled-up wins as digital conduct of business enables startups to accelerate their growth and offer the chance of a big win for their investors. As investing in startups can result in great return, it also has a great risk of loss. Here are some key skills to manage and avoid risk for angel investors:

1. Understand the startup

Understanding the service/product of the startup is a must to be able to scale the risks in the business, evaluate the need for the product and see the potential behind it by considering your own prediction of progress direction for numerous markets.

2. Follow the macro indicators

Considering the geography of the business is often less important than other factors while investing in startups as today’s technology makes it possible to reach out to customers and enter new markets from all around the world. However, acknowledgment and continuous research of political, geographical, and other macro indicators let investors to have a better conceptualization of risk. For example, a medical startup investor who is about to invest in an Indian mobile patient screening application should know that in India, 80% of hospitals are private and 85% of them have less capacity than 25 beds.

3. Learn about various business verticals

As the 21st century way of doing business is still getting transformed, there are numerous opportunities emerging due to the transformation. There is a need for an improved solution every day in business processes. Familiarity with various business verticals can let the investor be able to analyze the right opportunity in the B2B startups segment.

4. Diversify your portfolio

If you believe that you have not found your future unicorn yet, you can try to diversify your investments through multiple investment opportunities from different markets, sectors, and players. A well-defined strategy will pave the way for success. As investing is the art of risk management, you should diversify your risks into multiple sectors, markets, and startups in those ecosystems. If you have already invested in a startup in the IT sector, you can invest in a startup from a different business vertical and diversify the risks.

5. Know how to analyze data

Data tell the story behind startups. Having data to analyze will help you to set a target for yourself as you are able to set targets for growth, revenue, or sales of the startup.

6. Stay up to date and have a strong network

Staying updated is crucial for angel investors. Angels need to know the directions of several markets in order to spot the right opportunities in the business ecosystem and make their move. That’s why a strong network would be just perfect for an angel investor to stay current.

Utku Temel

Angel Effect Team