Much like going to the grocery store and sifting through a mountain apples to find one without blemishes, identifying the perfect-looking company to invest in takes a good eye. To make your eyes a little sharper, take a look at these four ways to identify the perfect early-stage growth company investment…
1. Exit Strategy
Does a startup have a clear exit strategy in place? It’s important that you as an investor know how you are going to make your money back and at what timeline. Without a clear direction or plan to generate returns for you, the investor, there’s little reason to dive into the opportunity.
2. Clear Ownership
As an investor you must have a complete understanding of who owns the business and all of its intellectual properties. If there is any doubts regarding patents, copyright, or ownership of assets, your investment should be withheld until those issues are legally taken care of.
Some early-stage growth companies can make a splash early, but disappear in just a few short years or even months. Conceivably, this could still prove to be a solid investment – if there is a swift exit strategy in place. But ideally a company should be able to demonstrate that it can play the long game.
Founders must be willing to work with investors and be available virtually at all times. A company may look great on paper, but any working or financial relationship which could become destructive or stressful may not be worth investing in at all. There must be a mutual respect between founders and investors, each knowing their place in the company.