Is Startup Investing Right For You?

By Tim Houghten

Startup investing may be right for the many individuals in the U.S., if it is done well.

Why invest in startups offline or online via platforms like 1000 Angels? What role should startup investing play in your financial plan? What’s the smartest way to embrace this type of investment?

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Three Reasons to Add Startups to Your Portfolio Today:

  1. Growth

  2. Diversification

  3. Impact investing

Replicating Success

Matt Theriault, host of the Cash Flow Savvy podcast on iTunes, poses that if you emulate what the wealthiest are doing, you should get the same results, and vice versa.

So what are the wealthy doing that is working? A quick review of the 2015 Forbes list of the richest billionaires shows that virtually all members are invested in businesses in some aspect. A huge percentage have invested in startups or have launched their own. The 2015 Midas List highlights this even further.

Then just look at what the most notable individuals, investors, companies, and fund managers are investing in today. Whether you are a fan of Jim Goetz, Mark Cuban, Barbara Corcoran, Warren Buffett, Peter Thiel, Google, or Facebook; there is a common thread of investing in or acquiring startups and growing business ventures.

The New York Times reports that while many individuals may not be aware of it, some of the  performance of their 401ks and mutual funds might already be credited to startup investing. Big name funds like Fidelity Investments, BlackRock, and T. Rowe Price have already been incorporating shares of startups like Uber, Pinterest, and Airbnb into their pools.

Direct investments to private companies give individual investors more control versus pooled vehicles, may reduce investor expenses, and when purchased through self-directed IRAs, may be a tax efficient way to allocate.

A Quick Caveat

While the new SEC Regulation A+ has cast aside the velvet rope to allow more individuals to participate in the benefits of startup investing, and more ventures might get to IPO faster, every new venture has its risks. Early Stage investing across a number of startups may assist in reducing risk, and may be less risky than trying to build your own business from the ground up. But there are no guarantees of multi-billion dollar valuations and IPO exits.

Startup Investing Done Right

Here are five tips to leap the laggards to successfully invest in startups for maximum results and safety:

  1. Explore the benefits of angel groups and networks in your area.

  2. Hone in on curated and pre-vetted startups for investment opportunities .

  3. Dedicate an appropriate percentage of your portfolio based upon your personal risk tolerance

  4. Find a startup investing platform that provides convenience, efficiency and effectiveness.

Read this advice for being a successful early stage Investor.

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