With all the startups popping up nowadays, investors need to learn how to filter out the good investments from the bad. Here are the top tips in finding the best places to invest.
According to The Next Web, investing in startups is a rewarding experience especially if it grows and expands. That's why it's important to assess whether an investment is worth it and profitable for the investor.
First, as an investor, you need to be discerning about the media attention that startups get. There's a fine line between hype that talks about a new company's potential or just paid buzz.
"Hyped startups thrive on pundits' praise, feeding their confirmation bias," David Cowan of Bessemer Venture Partners commented. "Great startups challenge their own ideas until they have a product that users absolutely refuse to stop using."
"My advice is to firstly understand the media culture around startups, and then learn the flavour of their investor portfolio," Finder.com CEO Fred Schebasta said. "The important thing to note about media culture is that almost every startup will get an initial kick of press when they launch - journalists need something to write about, even if a brand's launch isn't particularly effective."
Second, get to know the company's founders to determine whether they deserve the investment. Rowen Simpson, an early-stage investor of Hoku, admitted that he has placed money in a new venture in the past without taking the time to know the founders but it did not end well.
The publication noted that investing in a company is a lot like finding a husband or wife. "You didn't ask your spouse to marry you on the first date, did you? Then why invest in someone the first time you meet them?" the website wrote.
In a commentary by Alexander Goldstein for Fortune, he noted that looking for smart, motivated investors is crucial to a startup's success. Entrepreneurs need to consult with investors to check if their idea is practical and doable.