Having access to startup investment opportunities online is a completely new development for most people. Investors, now more then ever, are able to forge their own startup investment portfolios with the help of online platforms.
You may be attracted to a particular industry because you can see the potential for growth or to particular companies based on their management team, technology, or track record. Whatever your motivations or investment criteria, it’s worth establishing your goals in advance so that you can make strategic investment decisions. Some criteria that venture investors typically consider when they invest are:
- Stage of company
- Market sector
- Business models
- Investment size
- Number of investments
Startup investments are some of the riskiest investments that an investor can make. When investing, it is important to keep in mind that the majority of startups fail and those that do provide a return to their investors may take five to seven years (or more) to do so. Therefore, investors who would like to invest in startups should take the following precautions:
- Asset allocation: Do not allocate more than 5-10% of your overall portfolio into alternative assets, including startup investment opportunities.
- Diversification: Build a diversified portfolio of a minimum of 10-15 startup investments.
- Investment horizon: Do not invest any capital which you are not comfortable having locked up for at least 5-7 years.
- General risk factors: Investors should also bear in mind the general risks inherent in the asset class: https://www.seedinvest.com/general-risk-factors
Investing in startups is also a great opportunity for investors who want to contribute more than just money. One of the underappreciated benefits of equity crowdfunding is the ability for companies to attract value-add investors who may have otherwise been difficult to connect with. Many seasoned angel investors, in fact, will not consider an investment unless there’s something extra that they can bring to the table – whether it be sharing their experience and expertise or opening up their network of contacts.
On SeedInvest we collect current portfolio information and asset allocation to help investors think through what asset allocation and investment strategy is most appropriate for them. We are available to chat on the phone or through online chat to help investors.
This post was written by seedinvestedu on October 17, 2016
Planning Your Startup Portfolio