Anyone looking to profitably grow a new, appealing, business should do a good deal of research before making the investment plunge. Investing, in general, requires the investor to do their due diligence in order to make educated financial decisions. Investing in a startup, however, can sometimes prove to be a little riskier. Here are some of the important factors that any potential investor should assess while looking at a startup’s profitability.
Gauge The Founder’s Initiative
While it is a founder’s job to be passionate about his business, some of them seem so focused on promoting their startup that their ability to delegate or handle operations veers into a liability. Investors would be wise to research a startup founder’s business experience and tally the successes against the failures.
If the company seems like its would be feasible to invest funds, it is important to remember that even the surest business plan is susceptible to the whims of fate; some outside, an uncontrollable factor may flare up and quash an otherwise revolutionary business venture. A savvy investor never invests more than he can afford and never more than he is willing to lose in a worst-case scenario.
The Startup Maintains a Balance Between Novelty and Presence
A business can be incredibly novel in its approach to a common issue, but ventures that are too odd may have a stunted potential for growth. Conversely, a business that fails to stand out from its competition is likely doomed to limited and short-term success.
Fully Research Its Crowdfunding Venue’s Process
Crowdfunding sites are a recent and explosive new way for people to find investors. Although these sites are subject to review by the Securities and Exchange Commission, not all crowdfunding sites, like “Patreon” and “Gofundme” and “YouCareme,” work under the same exact rules. Some individuals have used these sites to fleece their investors, the people who completely fell in love with the message, of every possible cent and abscond with the funds. Indeed, some of these sites’ policies state that allocation of all invested funds is completely up to the startup’s discretion, provided the minimum established goal for launching the good or service is met.
Look Over the Company’s Multiyear Plan
While not every company will have a long-term plan covering a century, it is a good idea to assess the startup’s forethought into its livelihood and to consider how feasible that plan is for its success and profitability.