Over the past 15 years, it seems like all of the money in startups and entrepreneurship comes from the tech industry. And much of that money is made from websites that start with simple ideas and grow into huge international companies. Amazon, Facebook and eBay all had humble beginnings, but are now three of the most visited websites in the entire world. The success of these companies has led many people to wonder how they can get a slice of the pie for themselves. The answer is for investors to invest in startups.
Investing in these small companies that may not even have office space yet can be daunting. Someone may be putting their hard earned cash on the line to back a group of people who may not amount to anything. Or they could be about to create the next Google. But there are ways to tell if a company is a solid investment or too big of a risk.
Wise investors do business with companies in industries with which the investors are familiar. It wouldn’t make much sense to throw cash at a company that provides an education service when the investors know nothing about education. Without experience, it would be difficult to spot flaws in the business plan or execution of the product. By staying within a familiar niche, investors will have a more active role in the growth of the company and help guide it toward success.
Of course, no matter how much knowledge an investor has within a particular industry, there’s still a big possibility the project will fail—and the money will go with it. But by doing their homework and taking the time to identify the strongest startups with the most promise, investors can see a big return if they’re patient.