Investing in a startup, rather than investing in a pre-established business, is much more rewarding. It allows you to have more say and control over the tone, brand and direction of the company. You’ll also be creating a lot of new jobs, and helping a young entrepreneur further boost our economy.

It’s a noble pursuit, but shouldn’t be attempted blindly. There are a number of important considerations you must make first, before you dip your toes in the water. Have a read of the following tips, and act on them as necessary!

Are you investing in an industry you know?

Even though you will largely play a financial role, and not a creative role, it’s vital that you know and love the industry. This allows you to offer more advice to the business management, and it also allows you to predict where the company will go and what’s best for it. If you understand an industry, you will have a better sense of what that industry requires.

Plus, it just helps to be passionate about your cause. If you love movies, but aren’t bothered about music, don’t invest in a music start-up. What’s the point? That company would be far better off with a more passionate investor behind their back.

Have studied the competition?

Before you slap any money down, it’s important to take a critical look at the current market. Especially in relation to your chosen start-up. Do they have any competition?

Is that competition dominant? Is there any room on the market for this new business? A simple check can allow you to predict the future of the start-up, and help it grow.

Also, it’s a good idea to look at other investment opportunities and sources, to glean as much advice as you can. Sites like http://alternativeinvestmentcoach.com/ can offer you various investing tips. It’s vital you stay informed. It’s not as simple as just throwing down cash, so understand the process first.

Have you conducted background checks on the business owners?

It might sound a little shady, but it’s critical. The people running this start-up could have a history of failed business management. They could even have a criminal record! Anything that tarnishes them, tarnishes you and the chances of getting your money back.

There are many guides online, much like http://www.howtodobackgroundchecks.org/, so you aren’t without help. You don’t need high-level government access or anything, either. There’s plenty you can do by yourself.

Are you placing all your eggs in one basket?

Because it would be wise not to. Look, as good as this start-up may be, you have no idea how successful they will, or won’t, become. They could be bankrupt within a month. It would be wise to hold some cash back, and scour for other opportunities.

You could find another promising start-up that you also want to invest in, and you’ll be able to if you are frugal. Plus, if you put all our money into one business, and it fails, that’s bye bye money!

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