Six important tips for the first time startup investors

Bill Clark is the CEO of Microventures, a broker/dealer in securities which uses crowdfunding to allow investors to invest between $ 1,000 to $ 10,000 of startups online. You can follow him on twitter @ austinbillc. An angel investor used to be defined as a person with high net worth. They have usually more than 1 million dollars and private invest money in start-up companies seeking capital. The SEC limited to investing in private to accredited investors mostly Affairs. I say mostly because there are opportunities for investors not accredited participate on a limited basis. The definition of an investor registered in the United States is a person who has a net value (excluding principal residence) of $ 1 million, income of $200,000 per year for the last two years, or $ 300,000 of income of households by year for the past two years.

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Angel investing has gained much popularity despite concerns about the bubble burst. You need to understand what you get in front of this initial investment. The general rule is that you should not invest more than 10% of your net worth, since the startups can present a risk. Investments typically range from 25 K $ to $250,000, but with less capital requiring startups for the launch of our days, the amounts are away.

Apart from the rule of the accredited investor, you must have all the qualities to become an additional Angel, but you must ensure that you understand the following concepts.

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Make sure that you have access to your capital so that when you find a great startup you have easily accessible money to invest. You don't want to wait for liquidating a CD or a stock, or try to get money from your IRA and watch an excellent opportunity to pass you. In addition, you do not want losing startup time if you can get access to your funds. You can develop a bad reputation if you start committing and choirs of transactions at the last minute. The startup community is a large network, and word moves quickly if you are disagreeable to treat. The majority of the startups fail. Also a long time that you understand the investment can be risky and could you not your investment back, then you are at least be realistic when thinking of investing. If emphasize you too much writing of audit, this means that it is perhaps not the right time for you. Given the high rate at which the startups fail, it is wise to spread your risk by investing in more than one. The objective is that a few startups more successful pay for those who fails. Ron Conway made this strategy "Spray and pray" success. The idea is that invest you in a large number of transactions from the beginning and then narrow your focus in on those who have more success and which require additional funding. You must realize that, even if your startup is successful, it could take five years to recoup your investment. The most common way to get your money from a private company is a liquidity event, such as an offer or an acquisition by another company. These events, take the time, sometimes even up to 10 years. Be patient.

In recent years, there has been additional opportunities for investors to sell shares. For example, GroupOn raised almost $ 1 billion, of which some was to allow the shareholder liquidity. Also, new platforms like SecondMarket and Sharespost help liquidity by linking your shares of the company with an interested buyer.

Each startup should have an exit strategy clear they can share with investors. They should have a list of competitors who might be interested in an acquisition or the plan might be to make public such as LinkedIn or Facebook. If you are not clear how the startup will out, or that they cannot give you a list of potential competitors, you must think twice on the investment. While you are evaluating a startup investment, startup is probably looking at what you can bring to the table outside of an audit. A large part of angel investing is helping companies you invest in their mentoring or connecting them to additional people who can help them succeed. In the end, investing is not just about money. Help an entrepreneur trying to build a large company can be very rewarding. You are also surrounded by smart, creative people who come with really interesting ideas. The disadvantage is that it gets never telling easier not to someone who is passionate about a project.