4 Things An Investor Should Do Before Investing
March 5, 2019 (Investorideas.com Newswire) No one in this world can tell you that investing in private companies is easy. Not only are these investments risky and illiquid, but they are also long-term; hence, you need to make careful choices and/or decisions. To put it simply, you need to do a lot of work up front in order to increase your chances of success.
With all things considered, it is safe to assume that you do not just jump into investing in a company simply because you feel doing so. There are a handful of things every investor like you should consider beforehand. Without further ado, here they are!
1. Talk with the CEO
You might think this is an impossible thing to do, but executives are actually happy to talk to investors. After all, they want to get you onto their side. And what is the better way to do that than to have a conversation with you? Once you have this opportunity, do not let it pass and see if you share the same vision and values with the CEO. Find out about his different market approaches and, at the same time, how he projects his appeal towards other investors. More importantly, gauge whether or not he is the kind of person or leader who can execute the company's vision.
There are lots of product ideas and business concepts out there, but they can be nothing if the CEO does not have what it takes to turn them into a reality.
2. Talk to an expert
Your goal here is to basically find a person who knows the industry that you are interested in. Let's say you are interested in investing in a website that discusses everything about the law. Perhaps they provide an online service that helps people find the right lawyers in their area. It could be about divorce or being a personal injury victim. This is where you want to talk to a certified expert, someone who actually knows the ins and outs of the law. Also, it does not hurt to consult a professional investor.
There are different platforms you can use to find one. In fact, you can start looking on LinkedIn. It may require you to spend a few hours, but there is no doubt that you can find an expert who can help you with your investing journey.
3. Always have an exit strategy
What most investors do not believe is that exit strategy is not needed. They think that their investments can always return them success. No, it does not work that way. No matter how good a company is, you should consider the possibility of it going south. This is where you need to determine the many exit strategies for the industry that interests you. Is the business going to be big in the near future? Will it go public or become an attractive acquisition target? If an IPO is not plausible, who could be the potential buyers when it reaches the ideal scale?
4. Understand the business
This is perhaps the most important of all in this list. Before you invest in a company, make sure that you actually understand its business. Basically, you should only invest in what you know. Just because something looks attractive does not mean it is worth investing. Your first move is to always understand the business before going further. And the better you are at doing so, the more confident you will feel. Why would you decide to invest in a tech startup if you barely have tech background or knowledge? Remember to stick to what you know very well.
Investing in companies is easier said than done. There is a lot going on behind the scenes. And if you want to make sure that you get your money's worth, be careful with your choices and decisions. Following the above-mentioned steps is a good start already.
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