As an investor, you are always going to be looking for the next promising thing. The next company that stands out as not only having a great idea, but having the tenacity, the drive, and the ingenuity to stand out and thrive in an incredibly competitive market. It is especially important right now, as every new business is going to be running head-first into a lot of challenges. There are soaring costs, rent increases, and fuel price increases. As a result, customers are spending less money in an attempt to make it through this cost-of-living crisis.
But those outstanding new businesses are still out there, regardless of what the market is doing, and they are going to need your help. There are a lot of different factors that you will be thinking about when you are looking at supporting a new start-up, but something that you are going to have to think about is how do you want to support them? There are several different options that you could consider, so let’s break them down.
Be An Angel Investor
This option is of course reserved for those who have a lot of ready capital at their disposal. Most start-ups and entrepreneurs dream of finding the perfect angel investor, the person or company who understands exactly what they are going for with their business and can supply them with the capital they need to launch. Being an angel investor is something that can yield tremendous dividends. If you are the sole investor, then you can set the terms of your investment and profits to a large extent. However, it is just as important to note that you would be taking on all of the risk. Even if you find a business that you believe in completely, the market is such that it would be a huge risk. You would need to think very carefully before taking this step.
Investing In An EIS
One of the most popular ways to invest in start-ups right now is through an EIS. This stands for Enterprise Investment Scheme, which was initiated by the British government as a way to stimulate investment in start-ups. They did this by providing tax relief to anyone investing in EIS schemes. If you are looking at investing in EIS schemes, then you should think about looking at an investment team that has a portfolio of emerging businesses in strong sectors, such as tech and AI. Oxford Capital is a great example of an investment team that works specifically with start-ups in these dynamic industries, and they have an EIS Guide that breaks down how they work.
Even if you have never invested in a crowdfunded enterprise yourself, the chances are that you know someone who has. While crowdfunding has traditionally been done to support charities or artists looking to make their next project, it has become an increasingly popular way for start-ups to secure their investment capital. However, it is important to remember that one of the reasons why the start-up in question may have opted for the crowdfunding route is that they may not have been able to find their capital through traditional routes. If you are thinking about investing through crowdfunding, you will need to do a lot of research to ensure that your investment is in safe hands. Find out what their business plan is and request a meeting with the entrepreneurs to find out what their plans are going forward.
Of course, being a part of the support network for a start-up does not simply have to mean financial. If you want to be a part of a start-up’s evolution, you could think about coming on board in a different capacity. For example, could you use your years of experience and expertise as an advisor as the entrepreneurs take their first steps into the market? Could you offer help with the search for funding by using your professional network? Things are going to be incredibly difficult for any individual or group launching a start-up right now. If you could help them to steer clear of some of the major pitfalls, then this could be almost as essential as financial support.
There are many different ways that you can invest in a new start-up, but what you need to consider is the following: what do you want in return for your investment? Do you trust the people behind the start-up to make good on their business plan? Can you afford the losses if things do not turn out the way you hope they will? Any research that you can do will help but it is also a good idea to look at ways to make the most of the expertise of others and to minimise risk to yourself.
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