Ways to Start Investing in Start Up Companies

The goal of every investor is to make money. Some dream of striking it rich by finding a startup company to invest in before they take off and become profitable ventures.

However, the high failure rate of new startup companies means you must be extremely cautious about where you decide to invest your money. The first rule of thumb is to never invest money you cannot afford to lose. That is a recipe for disaster. Investing is a high risk game and you should always use money that is not necessary for your survival. However, if you are ready and willing to take the risk, here are a few ways you can make money investing in startup companies.

If you have always dreamed about starting your own business but are short on ideas, you can invest in startup companies as a principal. Provided you have the skills and knowledge needed to help take the business to profitable level, you can find someone with a good business idea who needs capital and is willing to take you on as a partner. In addition to determining how you will cut up the profit pie, you need to decide on what your respective responsibilities are to avoid any trouble down the road.

For those who would rather take a silent interest in business, you can invest in startup companies as an angel investor. This is an investor who exchanges funding for a stake in the company but who largely has not role in its management or development. Usually it takes multiple angel investors to provide enough money to fund a new business venture. Therefore, it is important that you all come up with a good exit strategy that details how assets are going to be liquidated and the money dispersed should the startup go bust.

Another way to invest in startup companies is to go through a venture capital group. These firms pool money together from multiple investors and funnel it into a variety of startup companies. The risk is spread around both the number of people investing and the number of companies getting the money. Therefore the impact of failure with a particular company is lessened. However, you should still be aware of the risks. You want to work with an investment group that has years of experience investing with startup companies and who has a track record of picking winners.

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