Which Startup to Invest in?

Investing in startups seems to be more promising than any other type of investment in the present-day economy. However, knowing which startup to invest in is crucial for success because it doesn’t work by investing in just any startup. Rather, you need to pick startups very carefully.

If you are new to startup investing and don’t know which startup to invest in for the best returns, this article is for you. This article will discuss all the points you need to consider when deciding which startup to invest in.

which startup to invest in

1- Selecting Industry Specific Startup to Invest in

Remember, the success with startup investment depends on the right pick at right time. Industry-specific selection for startup investment can be a great idea for beginners, as it can minimize the risk considerably when you.

  • Select an industry or a couple of industries that you are familiar with.
  • Opt for the industry you have worked in.

Selecting startups from an industry in which you have worked in or are familiar with gives you an advantage of understanding the market quickly and in-depth. Once you have an understanding of the company’s market, it will be easier to evaluate the merits of multiple startups and determine which startup to invest in.

Knowing the industry well can also give you an idea to assess the startup’s future and how well can it do in long term? And more importantly, you will better know when to cash out!

How to Decide the Type of Startups to Invest in

Choosing the startup based on an industry that you are well aware of answers your primary question, “which startup to invest in”, but you need to know more than that. For instance, you have shortlisted a couple of startups from a certain industry; startup 1 is at the ideation stage, startup 2 is in the product development stage, and startup 3 is about to have a soft launch. Now how to decide which startup to invest in.

Paul Graham, an angel investor rightly says, “startup investing is easier than I expected, and also more interesting. The part I thought was hard, the mechanics of investing really isn’t. You give a startup money and they give you stock.”

Investing in a startup can be really very easy, but finding the right startup to invest in is still tricky. When you have a few tempting options available and you are not sure which startup to invest in, the following tips can make things easier for you.

  • Explore the venture investing platforms like microventures.com, fundersclub.com, etc for direct investments.
  • If you are investing in startups for tax shelter, investing in startups through your IRA or self-directed 401k is a great option.
  • You may also consider investing in startups via personal and professional connections with entrepreneurs and founders through Linkedin and other business networks!
  • Attending pitch events is another great way to look for the best startups to invest in.
  • Subscribing to startup newsletters can also be very helpful in finding investable ideas!
  • Join a syndicate on AngelList if you prefer to follow other investors.

Some More Ideas on Which Startup to Invest in

Still not sure which startup to invest in? Here are some more ideas to find the best startups to invest in.

  • Invest in pre-vetted startups.
  • Do not put all the eggs in the same basket; invest in more than one startups.
  • Do not invest all at once, invest in rounds!
  • Invest only in what you understand; i.e. your own domain.
  • Invest in startups that may benefit from your professional expertise as well.
  • Do not invest without conducting a thorough market research, checking founders’ credibility, and understanding business model.
  • Do not forget to review and analyze the legal documents.

The Bottom Line

Startup investing is great when you are sure which startup to invest in. I am sure with the above tips and ideas you know which startup to invest in.