When looking at startups such as Uber, Facebook, and Airbnb, several investors have the same feeling. They wish they didn’t pass up on the opportunity to invest in these companies when they were in their infancy.
Investors who are looking to invest in startups are making a great decision due to the chance of getting high returns. However, one should keep in mind that there are a lot of companies that fail to take off. Due to this reason, it is crucial to have a sound strategy in place before choosing to invest resources.
Below is a list of the best practices one must follow when providing funding for startups:
Always diversify the investments
It is common knowledge in the investment world that people need to have diverse portfolios. However, when it comes to startups, they are quite volatile. As a result, putting all the eggs in a single basket isn’t the right decision and can result in a significant loss if the business is unable to capture the market.
The trick is to invest in multiple startups to offset the cost. Again, for this method to be effective, one needs to come up with the right plan. It is crucial to avoid spreading the resources too thin since this strategy won’t work. The best solution is to curate a group of startups and invest in them.
Disruptive businesses tend to perform well
Taking a look at popular startups such as Airbnb and Uber, they disrupted the market. Companies should be able to think out of the box and come up with innovative solutions. By creating a new norm, they will be able to stay ahead of the competition. The chances of these businesses doing well go up significantly when they are ready to take the risk and be different.
Remember, investors should only invest in what is affordable to them to avoid facing significant financial strain. Following the above best practices will increases the chances of getting a higher return on investment!