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Investing in startups: 10 tips for investing

Investing in start-ups is, above all, about passing on your experience to young entrepreneurs who want to innovate — and we need that!

But you also need to make money, otherwise you'll eventually stop investing. And you'll move on to other asset classes (real estate, private equity, etc.). That might just be the problem!

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How can you optimize your return on investment?

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There isn't really any training that guarantees success! And yet, as a Business Angel, you need to be able to learn; it’s almost a profession in itself!

When you start investing, you are often alone and inexperienced. You will likely start by losing money before you understand how it works and can start making a profit. It will take about ten years from the moment you start investing to the moment you have made exits that offset your losses.

When investing, we fear losing our money or missing out on a great opportunity (FOMO).

Psychology and cognitive biases play a major role in investing in general. One thing is certain: when you invest in start-ups, there is a high chance you will lose all your money. You must therefore only invest what you are prepared to lose and diversify your portfolio as much as possible (having at least 20 to 30 holdings).

It’s the law of large numbers that pays off. And that is our positioning with Super Capital.

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The advantage of investing in start-ups

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What’s beautiful, though, is that if you invest €1,000 in a start-up, you could lose €1,000, but you could also make 10, 50, or 100 times that amount. No other asset class allows for this (aside from crypto speculation).

That’s also why there are so many Business Angels (BAs) investing. And that number will continue to grow thanks to the diversification of investment platforms like Roundtable, for example.

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My tips for optimizing your start-up investments

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Here are my 10 tips for optimizing your start-up investments:

1. Define your investment thesis and diversify your portfolio. We actually wrote an article on the subject if you want to learn more!
2. Only invest in what you understand.
3. Invest with others to discuss the deals.
4. Invest in an exceptional CEO..
5. Meet the entire founding team, not just the CEO.
6. Study market growth.
7. Understand the company's unfair advantage (tech, experience, barriers to entry, etc.).
8. Invest at a valuation that allows for an attractive exit multiple.
9. Ask yourself if VCs will invest in the next round.
10. Make sure you aren't the last sucker putting money in before liquidation.

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There are surely other tips—feel free to add your own!

If you don't yet have the keys to investing in startups, you can also contact me directly, @Frédéric Bouleuc. And don't forget, at Super Capital we have a VC fund and a community of Angel Investors, where we provide advice and send you pre-vetted deals!

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