There is no denying that the wealthiest cities in the UK have reached a saturation point when it comes to well-funded startups.
Venture capitalists have had enough of their funding in these well-to-do cities, and they are now seeking an opportunity beyond the big names, places that may not be traditionally considered as “tech hubs.”
With the increase in the number of savvy entrepreneurs launching their companies outside the country, venture capitalists, for the first time, are showing interest in these startups. According to recent updates, 40% of new businesses in the UK in 2018 required £10,000 or less as startup funding and two-thirds of the other ventures required under £100,000.
But how should you start your journey as an investor? How would you decide if the company you are investing in is worth spending on? Here are a few answers and solutions that you need to know:
1. Always work alongside an experienced investor
If this is your first stint at investing in a startup, it will be wise not to go solo. Learn from the best in the business by joining an angel group. These groups usually assess the deal flow of the companies before investing. Many investors, on the other hand, also focus on close collaboration to vet deals, set up regular in-person meetings, and pool capital. They also believe in seeking help from corporate solicitors so that they have an idea of the legal stand of the company in the market before investing. If you’re not well-versed at corporate law, the solicitors can explain the different rules and regulations that you may come across while investing.
You can also try various curated deals using different online startup investment platforms. Many veteran investors invest as a limited partner in a venture capital fund. This is a time-efficient technique to deploy money towards new startups. Although there are a few venture capital funds that are significantly large, a considerable portion of funds operating outside the Silicon Valley are smaller; so much so that they are equivalent to a single angel deal a year.
2. Always do your homework
Investing in a startup is not investing in gold. It is a risk that you may work for or against you. So, start reading and researching about the industry and the location-specific media. You need to focus on an industry that fascinates you. The best way to stick to a specific sector is by following the lead in a sector that you belong to.
For example, if you have a career in real estate, you shouldn’t look into the medical industry. Your primary focus should be on real estate companies because that is the industry you know about. This will also help while researching the companies because you already know what to expect.
Experts also suggest new investors attend startup investing workshops. It is not necessary that you need to be a part of an angel group. You can learn from their investment programs and understand how the accelerator deals flow. Ideally, you should attend one demo per day in these investing workshops and then set up a meeting with the companies that you think show the biggest potential of making it big in the future.
