Rurash aims to bridge the gap between dynamic entrepreneurs and smart investors.
Rules of investing in startups
Start-up investing is more than just investing the capital. It is a cheat code to participate in future returns. Here are a few pointers to investing in the right startups.
- Invest In What You Understand Avoid involving in investments that are overly complex for you. Most individuals know a handful of industries well. They have a reasonably strong grasp of those particular markets. They should understand how that industry works and what are the best companies in the space. It may not be possible to forecast the overall success of a startup, but if you have a reasonable understanding of the main drivers that impact its industry, you can estimate the growth potential to some extent.
- Market Size A startup needs to cater to a large enough market to give you significant returns on your investment. It will bring a good potential for being prominent in the future and achieving dominance. The startup must be a market fit with a scope of scaling.
- Competitors It is vital to know about the market competition. Investors can look at the existing players in the market and the strategies that startups follow to scale up at an exponential rate.
- The stage or valuation The valuation of a start-up impacts its attractiveness to investors. Entrepreneurs want a high valuation to raise high funding for their business, but it can make it hard to justify future financing rounds at an even higher valuation. Investors should consider the valuation at the time of deciding on a start-up.
How to invest in startups
Investors can invest directly/indirectly in the startup. There will be no third-party involvement. Most investors prefer angel investment in the direct form of investment. Venture Capital/debt/private equity firms are the indirect form of startup investments. Find the ways of startup investing below:
- Crowdfunding Crowdfunding is similar to mutual funds, wherein many investors offer a fixed amount. The funding decision depends on the business idea, action plan, and growth potential. Individuals who truly believe in a business idea can go with this option.
- Venture Capitalists It is the option to opt for big bets on startup investments. Venture Capitalists usually look for startups with good traction and offer professionally managed funds. These are the funds with great expertise and success potential with continuous monitoring.
- Angel Investment Angel investors invest with the expectation of high interest. They invest lesser amounts than Venture capitalists. Many business-minded individuals, alone or in a network, screen startups with a great success rate.
There are other ways also. You need to contact your investment/financial advisor for both direct and indirect investments to research and get a list of startups to meet your expectations from your profiles.
Startup investing is risky. There may be failures due to a lack of product-market fit, marketing, teams and other issues, and it may turn to a total loss of what you are staking. Therefore, due diligence is necessary for investors. Following are the key pointers for due diligence of startups before deciding on investing decision:
- Objective The startup’s objective should be differentiated, solving a unique customer problem.
- Management and Teams The founder and team should be passionate and skilled to drive the company forward.
- Obtainable Market Share It is also vital to look at obtainable market share and the product adoption rate besides macroeconomic drivers and forecasted growth rate.
- Scalability & Sustainability With a sustainable business plan, startups should have the potential to scale shortly. Investors can look at entry barriers and imitation costs also.
- Competitive Analysis Investors should know the true picture of the market competition. Investors should look at peers in the industry and highlight similar things.
- Financial Check There should be a financial business model with a clear vision of cash inflows over the years. They should know the break-even points and milestones. Such assumptions should be reasonable and mentioned clearly in the plan.
- Exit Paths Potential future acquirers are one key parameter in deciding on start-up investing. There should be subsequent rounds of funding, IPOs, and acquisitions for exit options.
There can be liquidation risk, dividend risk, and asymmetric risk.
How Can RURASH Help in Startup Investment and Funding?
Rurash helps its clients to boost their learning and knowledge base. It enables them to understand the markets better and build their portfolio with minimum risk. With expert insights and an edge on market calls, you can expect to invest in start-ups with high growth potential with profitability.
A startup may need funding for several purposes. It can be starting or running a business, product development, manufacturing, office spaces, sales and marketing, or even inventory. Most startups raise funding when they need to scale their operations.
Investors are a crucial part of the startup ecosystem as they can provide the capital many startups need. Investors always look for significant investment returns and exceptional teams that can help them to approach the right startups for those investment returns.
Rurash enables investors to discover and invest in leading startups. Financial experts in the team can help startups to find investments throughout the various stages of incubation and growth.