Imperium Investments is a company focused on managing capital and business, portfolio investment and investment advice. As a huge number of startups are going through the global market investment trends almost every day, the company decided to share its proven mechanics on how investors should choose “that one” startup.
However, there is also a disappointing trend among a whole array of startups – a significant percentage of them are not profitable or loss-making. Even a promising, at first glance, project can become illusory, or not demanded by users. For example, a startup designed for Norwegians may not be realisable in Asian countries.
According to the Startup Genome Report 92% of the activated startups are “dying”, and 74% of the Internet startups are closed because of the unobjective scaling, having greatly overestimated their own prospects. Imperium Investments emphasises that half of the startups mostly close down in 5 years. This is a typical thing for a variety of projects.
So do not be surprised when you hear that only 1% of startups are successful and bring investors significant return on investment. This figure is quite logical.
Imperium Investments recommends to apply special cheat codes in order to choose “that one” prospective startup and not to stumble upon the failed one, or get involved in a criminal machination.
Investing in innovative projects is certainly a big risk and it is extremely easy to make a mistake in the startups financial support. However, having thoroughly prepared for the projects selection, it is still possible to minimise the loss of finance and not to get into a fraud net.
The international investor, expert in financial markets and CEO of Imperium Investments Dmitry Leus has developed his strategy on how to select startups for investment:
“Investing in a startup is real science! However, unhurried and measured steps will lead you to the right choice. My main criteria for making an investment are scalability and competitiveness! I try to predict objectively the development of startup for 5 years ahead. After that you can find the answers to the questions that arose during selection process automatically.
You need to analyse the market not only in the current period of time, but project its development within 5-10 years in advance. Let’s recall, for example, Uber, which started with a tiny service with corporate cars. However, with the increase in demand for a taxi – the market has considerably expanded.
According to statistics, only 3% is the number of projects that investors choose from all startup initiatives. The initial stage of investing in startups is the study of the terms and features of investment. Have you already determined who you are: the business angel (early stages of the project), the venture investor (later stages of the project – less risk), or maybe you dare to create your own venture capital fund? You should approach structurally to this issue in order not to become the object of manipulation.
According to the mechanics of selecting startups by Imperium Investments the first step in choosing a startup is to get involved in the projects that you are developing and it will become your bonus. If you work in e-commerce – choosing a similar startup, you can integrate it into your own business. So make a parallel with your own business.
Pay attention to the global project. For example, is it really (or at all necessary?) that you have to introduce a guide-robot or a car in your area, which avoids any traffic? If the startup has an “internal” nature (targeting, for example, only a specific city/country), then it is not always a harbinger of success.
Actually, an integral factor in the startups choice from the Imperium Investments’ point of view is not to be afraid of engaging partners! If the project is interesting for you, but you cannot independently assess its full potential, then the perfect solution could be joining into the syndicate with other venture capital investors.
But do not misuse the thoughts of other investors. After all, one of the most common mistakes of investors at the initial stage is to rely on the impressions of partners. About 80% of investors invest in projects only because they are popular among colleagues.
The project stage is another important factor when choosing a startup. The overwhelming majority of investors prefer investments at later stages of the project. Namely when it is already understood whether the project will be able to compete and win the first positions in this segment. Specifically, at this stage, it is possible to predict the cost of marketing and even assess the risks.
Are you aware of unfair advantages? It is about the benefits of a startup – its distinction and uniqueness among the other related ones. Choose the projects that have no analogues.
When you have already chosen a project which you will invest money in, you need to certify everything documentarily, because often the machinations are related to legal documents. Usually frauds use several legal entities at once for money laundering. Thus, one part of the startup is registered at one person, the other one – at someone else. While the cash flow is aimed at the third person.
In such cases, the project can be created under a different brand, and the company, that already collected a large amount of the invested funds, can be closed at all. Therefore, you should carefully monitor where the company property is registered and who is the legal entity! However, the best way out is to use the services of a competent lawyer.
There is a lifehack for investors – investment tranches. Even if you lose the first part of the investment, the main one will remain.
International expert Dmitry Leus notes that investing in start-ups will always carry risks and pitfalls, but using key verification IDs while searching, you can protect yourself from financial losses.
So, we have formed a check-list of choosing the start-up , which according to the Imperium Investments each investor needs to adopt:
- Before you give preference to any of the startups – dive deep into this topic! Give yourself answers to all of the questions that arise in this area. Ask for an advisory opinion of your business partners.
- Find out the full information about the founders of the innovation project and its entire team.
- Compare the new business with other similar businesses. Figure out: is this product interesting and relevant to potential buyers or consumers at all? If a startup is focused on narrow audience it has little chance of becoming long-term. The project should not be initiated only to receive funds.
- Choose a project with a clear plan and monetisation scheme.
- Calculate the risk-to-income ratio of the startup. Make an assessment of the possible financial losses.
- Keep track of the investments costs that you have invested in the project! Evaluate your time and whether you can manage new business objectively.
Find creative startups, confirmed by the implementation scheme, evaluate the risks and successfully invest in innovations!