Why Startups?

Startups offer investors great growth potential and the ability to follow a small company along it’s journey to industry success. Admiral Markets, a reputable startup investing firm describes the 4 characteristics of the modern startup as being based on innovation, having growth as the main objective, using external financing and comprising of a small team of highly skilled individuals.

The Motley Fool also highlights many of the positives to startup investing. Unique opportunities, low investment limits and exclusive perks not available through investments in large cap equities all go into making the startup realm a very lucrative place to put your money.

Where to find Startup Investment Opportunities

Investment opportunities are everywhere, the biggest challenge is figuring out how you can get a piece of the pie for yourself. Publications such as Fundwisdom (among others) can be very beneficial in your decision making.

Crowdfunding websites offer investors the ability to buy ownership in a company, more often than not at a much lower cost than it would with a venture capital or similar fund. For a roundup of some of the best, modern crowdfunding sites we recommend an article from the balance small business providing an overview of many crowdfunding sites, their fees and how they work.

Your local chamber of commerce is another resource in your arsenal when it comes to finding startup investing opportunities. A simple google search and scroll through a local directory can provide you with insightful information on the different startups in your area, some with investment opportunities just waiting to be seized. Many startup investment platforms have very small minimum investment requirements and present a wide array of investment opportunities spanning across many exciting industries.

As of writing this, the world is plagued with coronavirus and the physical networking ability blocked for many individuals. LinkedIn is a great platform fledgling venture capitalists can use for networking with startup owners and taking the proactive approach to finding investment opportunities.

Save $ in Taxes Investing Startups

When it comes to investing in startups, a ‘self directed IRA’ as described by Startup knowledge center OurCrowdKnowledge is a great option due to its tax advantages. These returns can thus be held in a retirement account and will be tax deferred. What’s more, these investment alternatives have a low correlation with other asset classes, therefore may allow investors to hedge their investments during times of market volatility in stocks and bonds.

The Figures

When addressing any potential investment fund opportunity, you need to understand the data. For example, Barron’s has some useful information on the top financial advisors each year, these figures can be used as a benchmark for performance and a way to select top firms. Barron's reviews client's average net worth, total assets, location and more. Knowing a fund manager's track record gives you insight into historical returns but cannot guarantee future performance.

Barron’s also possess a range of economic data on various investment opportunities allowing you to make sound decisions on when and where to invest your capital. For example, the ‘stock movers’ section lists various equities showing the most movement within a certain period. Although these may not always be the most sensible investments.

A fund's past performance can often give a good indication into the future, however research and careful consideration of many variables is required to ensure a certain investment is right for you. Cryptocurrencies for example, can offer the possibility for high return yet also bear a lot of risk.

Top Advisors

There are advisors for each and every asset class, helping you work towards reaching your wealth goals whilst accounting for your desired level of risk. Most easiest to find are those that have expertise in public equities and debt. Barron’s showcases the track records and information on what they deem top financial advisors. We have not been able to locate any of these with expertise in startup offerings on the portals we cover.

An innovative tool known as RIA Match allows you the ability to connect with financial advisors quickly and easily, matching your financial goals and requirements to their listings of advisors. Successionlink is another tool offering a similar service and those in need of a service. LinkedIn can be used to locate advisors.

Assess Your Current Advisor

Reviewing advisor performance can often be a challenge. Ken Schapiro of Condor Capital Management built Backend Benchmarking, a tool designed to help you better manage your portfolio. Using this platform can cut through the clutter of biased reporting, allowing you to make an informed decision on the current performance of your money.

Should you give Startups a go?

All in all, an up and coming startup can be exciting for many (particularly new) investors. Although the returns can be vast, due diligence is required around the company to ensure the investment meets your risk appetite. Comparing the startup investment opportunity with other alternative investments may give you an accurate depiction of how one opportunity fares against another.

This article is written in collaboration with Callum Lepley.