So I am planning on buying shares of an early startup which is doing an internal round funding and I got the opportunity to invest. This is my first time investing and would want to know what are things to consider and what I should ask the startup for before I hand in a cheque.
Handing your first check over is always a little tense. It's mostly things you should ask yourself.
Know yourself and where you fit as a consumer and member in society. Learn from the the future focus on 2030 & 2050 it's all mapped out. Once you understand the new global market - you will be able to funnel down into the this startups market. Next ask yourself is the future outlook of this industry, of this vertical?
What job does this startups product solve? Is there need that the market is lacking that this product is solving? Is it brining value? This can be anything from whiskey too SaaS to machine learning. Doesn't matter what vertical they fall under.
Is this an innovative product that has been missing from the markets or is an idea the founders believe is amazing and so will everyone else?
What is the industry outlook? Everything is changing - so you need to know if this is a product that will exist and have a future in 2025. Is this ahead of any pivots and shifts?
Backbone... everyone founder is passionate about their product and what it can become. But many founders and companies fall short in not knowing what they don't know. Are they able to create/ do they have an ecosystem of experts that will support them. It's human nature to assume you can do something simply because you understand it. Work with people who are continuously learning and studying not just their craft but the world that it exists in. Who are their people? Do personal values reflect company values? How do the values extend and fall in every function of the company?
You may find yourself more often than not you will find one bad apple in each opportunity, it could be the co-founder, advisor, COO or a lurker. If they are able to recognize personality shortcomings and manage it - give it a chance. If they let this person rampant and put the company in jeopardy, start the conversation if they are able to have an open to having a dialogue and addressing concerns perhaps they may have not realized before - give it a chance. If they shut down and do seem concerned potential risks - move on.
Do they keep an open dialogue with investors? Do they involve investors through advisory or beyond quarterly reports? Is there a community? What is the transparency like? Samples in the mail and open camaraderie on what they are doing are me two big things after I invest. I want to know these people are still excited and passionate. What are they doing to innovate and grow. You can get a good sense of where they are at and where the companies. I love being involved with the companies i invest in.
Most importantly is this something does it excite you? Do you know someone or an organization that would absolutely needs it in their own life? Will they get excited too?
My first investment i came across at Whole Foods. The founder was doing a tasting - it was something I have been searching high and low for. The brand, the product and the founders it all has to make sense. Lastly, have a network of investors that you can go to for support - whether deal structure or their opinion.
And most importantly do they know their financials better than their own name? And how involved are the founders? This can not be a siloed function - transparency is a must. Founders must understand the basics of finance and capital markets.