Investing in your first company as you broaden your investment portfolio can be such a fantastic yet challenging experience. Investing isn’t easy as the amount of money involved is usually on the higher end as compared to other safer investment options. Here are some tips to keep in mind while investing in your first company:
Research on Other Stakeholders involved in the Company
A bigger brand name or well-known stakeholders behind a company are always reassuring but they aren’t necessary for it to be trustworthy or stable. A big label can add to the credibility of the idea but that is not the only criterion for a good investment option.
If there are other small investors, then it is always good to conduct a bit of research. Know what their portfolio is like, do a background check on the health of other companies they have invested in. It is always a good idea to know who else you will be working with other than the core team of the company.
Always lookout for a Good Business Plan
Make sure the plan is detailed and clearly laid out. The short and long term goals should be well defined. A good business plan should have a disaster and risk management section as well. Take your time to weigh the pros and cons of the plan and be thorough. Have the business owners explain to you their revenue model so that you can understand ROI on your investment. You should have the entire picture in front of you before you decide to fund the company.
Be Cautious
Investing in new business especially an online business should always involve a lot of cautiousness. If the business seems to be too good to be true, then it probably is. There is no dearth of scams or businesses just dressed up as legitimate companies.
Have an Exit Strategy
Every investment comes with the chance that things may not work out as planned. As an investor, you should have an exit strategy planned in case things go south. This should be discussed with the business owners before you provide them with funding. This gives you a cushion on a risky move and makes your position clear to other stakeholders that are involved.
