This is a user generated content for MyStory, a YourStory initiative to enable its community to contribute and have their voices heard. The views and writings here reflect that of the author and not of YourStory.

Why and How to Invest in a Start-up

Tips on how to invest in Start-up

Why and How to Invest in a Start-up

Tuesday February 21, 2017,

3 min Read


Before you know how to invest in a start-up, it is interesting to learn about the benefits you can derive from it. Let us begin by defining clearly the notion of start-up:

Start-ups are companies that generally stimulate the economy through innovation and dynamism. These companies of the future are trying to impose themselves on the market by proposing innovative ideas, as well as new services and products in different economic sectors.

Initially, in addition to the usual difficulties associated with starting a new business, startups often suffer from a lack of funds when they try to grow. As a result, they generally need to obtain funds from outside sources to establish their structure at the initial stage of development. A Start-up developer almost always needs to take some sort of a tourist tour around the area of interest to gauge the potential.

However, even with a solid plan, people are unwilling to invest because they are discouraged by the lack of guarantees and risk factor associated with start-ups, which has a serious impact on the evolution of new companies that are trying to develop and that often remain blocked at the theoretical stage for want of means.

For example, it is difficult for start-ups to obtain loans from banking institutions because the latter are reluctant to finance companies that are not yet well established and that present such a high degree of risk. Start-ups need to redouble their efforts to find funds.

Nevertheless, there are many advantages to investing in a start-up as the potential ROI is very high.

The role of investors is not limited to providing financial benefits. They help to stimulate innovation in the sector in which they invest, create jobs or provide an enriching experience in terms of networking, know-how and so on. This allows these young companies to develop more effectively.

The choice of a good partner is therefore a significant asset for these young companies who can count on the experience of seasoned investors and benefit from valuable advice.

Investing in a start-up involves a greater or lesser risk depending on the project, but the process is much more stimulating than a simple investment and the return on investment can be significant! How to limit risks?

- Do not put all your eggs in the same basket and invest if possible in several start-ups.

- Invest preferably in an area you know. This gives you a better idea of the competitiveness and specificities of the sector in which you want to invest.

- Make a thorough study of certain documents (such as the business plan and the executive summary), which will allow you to better understand the vision of the start-up and its potential.

- Familiarize yourself with the team in charge, and as far as possible, directly contact the members of the start-up to confirm that you are compatible.

- Make medium- and long-term forecasts.

It is important to study in detail the potential of the new start-up. For this, it is absolutely fundamental to study the market in which it operates. Indeed, if you want to build on the success of a new venture, you need to be able to determine how it differs from others, its benefits, risks and more