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Things To Expect When Investing In A Startup

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startup investment

Making the first move is tough, but it gives you the confidence to lead a crowd behind you and take them along the right path.

Investing in startups is an exciting and challenging process. The investor must choose his area of interest before financing, since it’s vital to understand the business mode,l and you can also help the startup with your strategic inputs. Depending on your investment profile, you can choose the following options to fund a startup business.

  • You can create a profile on global platforms like AngelList and CrunchBase to look out for interesting startups.
  • There are also different deal making platforms like LetsVenture and Venturefund.com that will help you to get connected with the startup community.
  • Crowdfunding is another choice if you want to invest smaller amounts along with another group of investors with common interests and risk appetite.
  • You can also try to establish contact with accelerators to find better startups to invest in.

The startup ecosystem is highly volatile, so before you decide to invest in a startup business, you need to consider many things like the liability, accurate valuation of the firm, your timeline, and your exit strategy. Most of the small-business investment opportunities come from friends, family, or word of mouth. So, before you get into financing a new venture, measure your steps carefully. It’s vital to understand the business model and the revenue generation model.

Understand the structure of the business

There is always a chance that a startup business may fail. So, you need to understand the structure of the business and the risks involved in detail. Many startup businesses shut down within the first five years of operation mainly due to a flawed business model. Hence, if you do not understand the structure of the business, the chances of failure is high. It is important for the investor to limit their liability in the business. So, before investment, drafting the scope of the partnership and the associated liabilities is crucial for an investor.

You may not see profits in years

If you want to invest in startups, make sure that you are not in a hurry. Putting a large sum in a business can be a risky affair, and there are chances that you may not see any returns in years. Set milestones accordingly and understand the potential of the business to break even.

Plan an exit strategy

Investment in a new business venture means taking a risk. There are chances that the venture may fail and your investment is lost. It is good to wait for five years before you can expect some return on your investment. However, this varies depending on the nature of the business and if you need some liquidity before that period, you should plan a proper exit strategy. These clauses should be clarified upfront before investing and should be agreed upon by both parties with a legal stamp.

Homework

There is rarely any match between your expectation from the business and the real scenario. So, before you invest a lump sum amount in a startup, you need to do a SWOT (strengths, weaknesses, opportunities, and threats) analysis of the project. The startup should also have a proper business and marketing plan. Stay involved and review the performance of the startup periodically. You may consult a business valuation expert to take the correct decision.

Happy investing!

Business

Business Insurance And Why You Need It

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Business insurance is a requirement that you should not ignore even if you are in a low-risk workplace. For certain business sectors such as healthcare industries, mechanical workshops or amusement parks, getting a liability insurance is essential. Finding the best insurance can be a challenging and complicated process, but it is better to get an insurance coverage. Disasters happen, and you need an authorized protection to save you from severe economic loss.

Why is business insurance necessary?

If you start a business and employ some people, you need to have business insurance. It is a legal requirement. The insurance coverage varies from one country to another. Almost all countries have made it compulsory for the companies to get a liability insurance. You may think that your business is small and has less risk. You can also think that you can afford the losses your companies might face. The business experts always advise getting a proper insurance for every kind of business. There can be natural disasters like floods or earthquakes. Fire accidents and thefts are not the only risks. Your business can incur massive losses due to disruption of work. There can be cash crunch, skilled labor crisis, road work, police barricades and criminal acts too. You should consider all the aspects before buying an insurance coverage for your company.

General Liability Insurance

Almost all trades have some liabilities. So, a general liability insurance is essential. Before you hire some employees for your business, get a liability insurance first. Your company becomes the ‘employer.’ It becomes a legal need if you wish to make your business a limited company. If any of your staff falls ill or faces any fatal accident during working hours, your company becomes liable. You need to discuss with your insurance broker about the amount of liability insurance cover your business needs. If there is any death because of their work in your company, you need to arrange appropriate compensation. So, you should avoid any expense trimming while buying insurance for the company.

Professional Liability Insurance

It is also known as errors & omissions (E&O) insurance. This is not a one-size-fits-all insurance. Each industry has different concerns while running the business. So, you need customized coverage for your business. The professional liability insurance protects the business from the claims that the company was negligent in performing their services accurately. When you buy the E&O insurance, make sure you appoint an attorney for your company who can defend the lawsuits filed against the company.

Property Insurance

Property Insurance is a must when you run a business. Be it your own building or leased property, you need coverage. This insurance covers your business inventory, equipment, signage, and furniture from any losses due to fire, storm or burglary. Home based businesses still do not get much coverage from property insurance. You need to ask your insurer for extra coverage.

Product insurance

Apart from the above-mentioned insurance policies, you should get an additional product insurance to cover your manufacturing business. It covers any loss due to manufacturing, distributing and retailing hitches.

Buying insurance for your business is complex. You need a trustworthy insurer. Every business needs a unique package based on the requirements of the company. You should always review your insurance policies and keep them in active status.

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Business

Things You Should Think About Before Bootstrapping A Business

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Bootstrapping is the process of finding funding from other sources like friends, family and other potential investors. As an entrepreneur receiving a check for thousands of dollars to help fund your business validates your idea and can motivate you to work harder in achieving your goals. While it seems like a good way to get funding for your business, it is not as easy as it sounds. Bootstrapping requires flexibility and hard work. Here are some things you need to think about first before bootstrapping your business.

The Right Partner

Having the right partner or co-founder can make your business run more smoothly. The right partner can make the bootstrapping process easier. Find somebody you can trust and who has skills that complement yours. If you’re a hardcore business man but not good in keeping the books or accounting, find a partner who can balance your books for your best chances of survival.

Fundraising is Not Business

A small business is usually composed of small staff and limited funds. As the co-founder, it is your job to find funding. However, bootstrapping can take you away from your business. This can be very risky especially if the business is still in its infancy. Your business can only grow when the team is spending time to grow it. But time is a fixed resource and without you there to help grow it, your business has less resource to grow the business, making fundraising a “costly” venture for you.

The worst part of fundraising all the time is that it makes you into a good fundraiser but worse CEO. Spending lots of time away from the business especially when you’re starting out can have a bad effect on it.

More Money, More Problems

According to many investors, they add value to your company. While this is true in some aspects, there are also investors that are “problem creators” and not problem solvers. Investors bring in money for the company and are great when you want to bounce off ideas but they do not actually run the business for you. In business, the person with the most information can make the best decisions and nobody is as well informed as you. Some founders are naïve in thinking that investors have the same goals as they do. This is wrong, because investors are in it to make money only. They don’t want to become a “world changing software” or become “the industry leader in garment manufacturer”. They want a return of investment with profit as soon as possible.

This is not to say that all investors think this way. All we’re saying is that their interests are not always aligned with your own.

Find A Mentor

Having guidance can help your business become successful. When you’re bootstrapping your business, it is also important to find investors who are willing to mentor you. A good investor/mentor wants you to succeed not only because they have money tied up to your business but also because they want to genuinely see you succeed. A mentor can help you make difficult decisions without being emotional while giving you financial guidance.

Money Does Not Solve Problems

Receiving a big check can seem like a lifesaver to many businesses especially small startups but it does not always solve problems. A common mistake among founders is thinking that if they had X amount then they will be able to do something.  More money in the bank gives you more options, but more often than not, it gives the business more ways to spend the money they shouldn’t be spending like offices or equipment they can’t afford. For small businesses and startups, bootstrapped money should be used as a tool to generate more money.

Gaining the attention of well-funded venture capitalists can be very flattering. First time entrepreneurs who have a difficult time finding capital through traditional sources can find bootstrapping attractive and it is a great way to start a business. However, entrepreneurs should not see it as a safety net that your investors provide. To make the most out of bootstrapping, you need to manage your business’ money as if it were your own because let’s face it, the business is your own.

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Business

6 Books That Will Change Your Life

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Man reading how to win friends and influence people at park

Whether you’re going through a transition in life, starting a new career, ending a career, or simply looking for ways to improve yourself, there’s likely a book for that. But today there are thousands upon thousands of self-help books from qualified authors to choose from, which ones do you pick? We’ve curated a list of some of the best self-help books for you to check out.

Think And Grow Rich

This comes as no surprise to anyone. Think And Grow Rich is one of the best self-help book ever written. To date, it’s helped hundreds of millions of people discover themselves. The book is a practical guide that outlines some fundamental laws that govern success and has been released internationally in just about every language.

Buy it here

How To Win Friends And Influence People

Dale Carnegie’s work was released in 1936, but it still remains a popular choice nowadays. The advice and practical tips suggested applies today as much as it did when it was originally published. To date, it’s sold more than 15 million copies and can be found on the shelves of many executives.

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The 7 Habits Of Highly Successful People


Originally published in 1989, Steven R. Covey’s work became an instant bestseller and today still can be found in every Barnes & Noble. It’s been reprinted and sold over 25 million copies in over 40 languages. The book provides valuable knowledge on how to be a more effective you whether at work or in your personal life.

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The Road Less Traveled


Over 7 million copies sold in it’s most recent print, translated in over 23 different languages, and being on the New York’s Best Seller’s list for over 10 years, this is a rare gem you don’t want to miss out on. Dr. Peck’s teaches his reader how to live a full and complete life, how to differentiate dependency from love, and how to find your true self.

Buy it here

The 5 Love Languages


Who knew there were 5 different languages of love? Dr. Gary Chapman did and his work has helped millions of people all over the world to renew their intimacy, learn how to love, and most importantly – learn how to receive love better. Beyond simply helping with personal relationships, learning the 5 love languages will also give readers better insights into dealing with people both at work and at home.

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The Art Of Happiness


Who’s more qualified to write a book about happiness than the Dalai Lama? Despite the great loss his country and he personally have suffered, the Dalai Lama remains positive and enthusiastic whenever you see him. Those who have been fortunate enough to be in his presence reported feeling lighter and even happier within just a few short moments. Coauthoring with Dr. Howard C. Cutler, The Art Of Happiness is a book that will arm you with the knowledge and tools to overcome everyday challenges and discover a better version of you – one that is happier and more fulfilled.

Buy it here

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