Opinion: What makes a start-up an attractive investment?

Jason Kluver
Jason Kluver

Are you an investor looking to invest in a start-up? Shadow Foundr, the on-line investment platform based in Brighton, gives six quick tips to give you the best chance to succeed.

1. Scalability: There’s a reason why most venture capitalists and angel investors put their money on tech firms. Generally, they can be scaled at will, and their software made relevant to millions of people anytime. If a company is selling a local product or a good that’s restricted, you’re unlikely to see your money generating great returns.

2. Team: The team you are investing into should be the right blend of experience and youth. The people behind the scenes should be committed to the company and working on the idea full-time. Remember, you are not just investing in the product but also the people.

3. Past work: If you are investing in a team that has not done anything substantial in the past, you are taking a massive risk. They should have some amount of credibility within the industry and if they don’t check that they have respected advisors on board who do.

4. Damage control: Nothing is guaranteed in business. Even the most exciting ideas may not be embraced by people. A successful entrepreneur should be ready for all eventualities. It’s important everyone has the desire and passion to bounce back out of a difficult situation if they occur.

5. Exit strategy: Consider what happens to your money if the start-up fails. You won’t get your money back! Similarly, what happens if the business is a massive success? In this instance, how will you get your money back? If there’s an exit plan in place, you are in a safer position. It is important the entrepreneur you’re backing has thought about how to return investor funds.

6. Funding requirement: Don’t just find out how much money the company needs to get out of the starting blocks and how they will spend the money. You need to know how much money they require to get to break even and beyond. This will more than likely require several funding rounds. It is not recommended to invest in a firm that does not have a proper plan for growth and additional funding.

For more information, visit: www.shadowfoundr.com
Jason Kluver is teh chief operating officer of Shadow Foundr.