Investing in a startup can be risky and quite tricky. If you aren’t careful, you might find yourself losing all your investments. Knowing what to look for in startup companies and how to reduce risk is crucial.
In the sixth episode of the Passive Investing Show, J and Ashley are joined by Neal and Rakesh Gupta to discuss what your expectations and considerations should be in startup investment. They talk about exercising due diligence, reducing risk in investing, and the potential of crypto startups.
Here are some power takeaways from today’s conversation:
Episode Highlights:
[03:41] What KiwiTech Does
KiwiTech engages in software development in exchange for partial equity and partial cash. It provides clients with development at a subsidized rate and a strategic partner to help them grow. They work with seed-stage companies that have software as a key component of their business.
[09:45] Working with KiwiTech
Direct investments are not easy to enter into with early-stage tech; KiwiTech’s platform is a diversified way to do so. Their Demo Days offer a format for portfolio companies to raise money by connecting them to investors and mentors. Initial investors and founders negotiate the investment, but their typical investment size is $250,000.
[13:57] Exercising Due Diligence
Look at the startup’s founding team. Most companies that become successful are the ones that have pivoted and done it well. Investors should also consider looking into the industries they have experience in since they will have a better understanding of how things work. If you want to reduce risk, look for companies with revenue.
[17:42] What to Expect in Startup Investments
When investing in a startup, assets can disappear quickly. Diversification is important; investing in more companies across verticals will reduce the risk of ending up with zero. If you’re investing in an industry that you are not familiar with, consult with experts in that field.
[24:47] Web3 and Crypto
Web3 has growth potential. Decentralized finances allow for more seamless and efficient national and international transactions. Crypto and NFT startups may have significant value creation in the coming years.
Notable Quotes from the Episode:
[17:56] “In a startup, it can go to zero very quickly. There could be a variety of reasons that happen that are beyond the control of even the founders. So diversification is really important.”
[18:32] “If you invest in five startups, it’s possible you end up with zero because all five could go to zero. But if you end up investing in more, you have a better shot.”
[25:39] “Will Bitcoin go up by 10x in the next year? Probably not. But a crypto startup or an NFT startup could, so there’s opportunity for a lot faster value creation in doing picks and shovels for the gold diggers.”
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