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| By Chris Graebe |
We’re now in the second month of 2023, and regardless of how the broad markets are behaving, investment opportunities are always popping up in crowdfunding and private equity.
But obviously, not all investment opportunities are made the same.
Recently, I had a thought about the process of reviewing so many startups and wanted to share that with you.
In our lives, as we look into doing anything big or important, we all have a natural thought process we go through.
If you’re looking to purchase a house, you may drive around neighborhoods, check your favorite real estate app for new listings or find the perfect realtor.
It's safe to say you don't just close your eyes and hope for the best.
Investing, like real estate, is best not approached like a shot in the dark, which brings me to today’s topic …
The Process of Finding
the Right Startups
You may be new to this entire process and are excited about the possibility of seeing potentially significant returns on early stage startup investments.
And I think that is something all of us here are hopeful for. But I think one of the most important things any early stage investor can do is to build and craft their process for picking the right investment.
Right now, just like those real estate apps I talked about earlier, there are a number of platforms that are currently hosting startups looking for investors.
A quick search on KingsCrowd, an equity crowdfunding data platform, shows that there are 688 startups raising capital right now. I think this will break 1,000 by the end of Q2.
But with so many opportunities in so many industries and sectors …
Where Do You Begin?
This is why having a process for constructing your personal portfolio is so important.
Let's walk through some different things you can do when it comes to building your personal strategy and process for identifying the right startups.
For me, it boils down to three important steps …
1. Identify your sectors: There are going to be industries and sectors that are naturally more appealing to you. Maybe you specialize in a particular field, and you can quickly identify if a startup is onto something (or not even close to being onto something). Or maybe you have a personal connection to an issue or disease a company is aiming to eradicate.
No matter how your interest is piqued, finding niches that you get excited about — the ones where you see the most potential for success — is an important step in identifying potential investments.
Of course, nothing is guaranteed in the startup world, but it's nice when you have some knowledge and/or personal interest in a particular sector or industry.
2. Identify portals you like: As I mentioned earlier, there are a number of investable startups with offerings right now, and they are spread out across various investing platforms.
As you browse different portals like Wefunder, Equifund, Republic and Netcapital, you’ll will see a variety of deals and conditions.
But you’ll also see that each platform has a thesis of sorts when it comes to the different startups they’ll allow to be listed on their platforms.
Some will take any startup while others are extremely selective. Eventually, you start to see more deals that catch your eye on a particular portal, and a lot of that will have to do with determining which appear to be better options based on the platform’s vetting.
I’m not saying there is one that you should exclusively use. I'm just saying that it's pretty normal to gravitate toward opportunities' on select portals.
3. Take your time: Once I find a potential investing opportunity I like, one of my favorite things to do is ... wait!
I like to:
• Ask questions of the founding team.
• See what questions others have asked and how the team has responded.
• Review the campaign page and then begin conducting research about them online.
• I want to see if they are legitimate, if there any bad reviews out there and how they might’ve handled them if so.
• I like to see how their raise goes over a period of time.
• I want to know if the leadership team is great at their craft, but not so good when it comes to raising capital for the business.
That could be a big red flag down the road when it's time to raise the "big" rounds. Waiting and watching will tell you a lot, so don't underestimate the value of patience in the process.
These are just a few steps you can take to crafting and building out your startup investing process. Remember, this entire journey is very personal, and you get to craft the rhythm that works best for you.
If you’re interested in my process, as well as the startup companies my team and I choose for members of Deal Hunters Alliance, you should join us.
Click here to learn more.
Have a great rest of your week, and until next time …
Happy Hunting,
Chris Graebe
