What should I be looking for from a team of entrepreneurs?
You should also be looking for a team who is passionate about their project. Even a revolutionary idea can be hard to pull off if the unit isn’t passionate about making it work. Complacency can hit, and competitors can knock your business out of the market.
Entrepreneurs who are passionate about their startups are also essential for communication. Passion for the business makes communication between everyone easier, and when everyone is excited to share their ideas, things can move forward quicker and more efficiently.
The founders should be experts in their field. Their product must be targeted exclusively to an audience that they understand. Even if it’s a great idea, a team that doesn’t know its niche of the market can delay the whole project as the founders learn the fundamentals, while competitors have the advantage of previous knowledge.
What should I look for in the business idea of a startup?
It’s usually a good idea to invest in startups in an industry, field or product you are already familiar with and have driven positive past performance in. Understanding what you are investing in will benefit both you and the entrepreneur and the business’s future performance.
A large and expanding market is also a must for a startup. If an idea is too niche, it may dominate its market share but remain a small business. Avoid opting for a product targeted exclusively to a very small audience to ensure the greatest return on your investment.
Finally, you should consider why the startup you are investing in is a good fit in the current market. If it has been tried before, why did it not succeed? If not, why hasn’t it been tried before? It’s unlikely that the idea you are backing is entirely original and has never before been considered, so it’s advisable to question if it will be a good fit and assure you good returns now.
How do I invest in startups?
The most streamlined and efficient process to invest in startups is by using crowdfunding platforms.
These are various platforms listing startup companies looking for investments. Alongside giving you all the essential information you need about a company you’re thinking of investing in, these startup websites also ensure that all transactions go through the platform, giving you an extra layer of financial protection. With an array of opportunities available, you can build a diversified portfolio without worrying!
Many successful startups, such as Monzo and Revolut, started with investments via crowdfunding platforms, and many will have international links that you can use to navigate markets and territory. Some crowdfunding platforms have other benefits, such as an internal market, which allows you to sell your shares to other investors at any time.
Crowdfunding platforms can be tailored to a particular sector, so it’s important to consider where your area of expertise is before browsing platforms. They are typically led by successful entrepreneurs who excel in their fields, meaning that you can be sure that the startups they associate themselves with have a great outlook.
However, suppose crowdfunding platforms aren’t giving you enough control or enough of a hands-on approach. In that case, you may opt for networking, making your expertise in your industry well-known, and ensuring you are self-certified as a sophisticated investor as per the FCA can all result in entrepreneurs approaching you. This may even help you build more links with other entrepreneurs, allowing you a hands-on experience of a wide range of startups.
How am I protected financially as an investor?
Investment regulations work to protect all parties involved. The EIS (Enterprise Investment Scheme) and SEIS (Seed Enterprise Investment Scheme) allow angel investors generous tax breaks on their investments. This makes investing less risky, thus protecting you as an investor and encouraging growth for the business by facilitating investment. Under the EIS, angel investors are not entitled to take more than a 30% share of a business, keeping the entrepreneurs in control of their business, incentivised and passionate, making the company easier for you to work with.
UK startups and investments are regulated by the Financial Conduct Authority (FCA). The Financial Services and Markets Act 2000 states that angel investors should self-certify as having a high net worth or being sophisticated investors, meaning that they are knowledgeable and financially stable enough to receive business plans and invest in startups. This helps the entrepreneurs feel that they can rely on your advice and can lead to a stronger level of professional trust, making work smoother.
How is crowdfunding protected?
Crowdfunding through organisations is known as investment-based crowdfunding, which is also regulated under the Financial Services and Markets Act 2000. This means that your investment is protected not just by the crowdfunding platform you choose but also by UK authorities.
How can InvestUK help with my startup investment?
If you are considering to invest in startups in the UK but feel you need more guidance, InvestUK offers a wide range business planning and advisory services.