The risks of investing in start-ups directly are similar to investing directly in stocks vis-a-vis investing in a fund. But in the case of a start-up, risks are greater because the exit route is not as clear, unlike stock market investments, points out Arvind Bansal, head, product and advisory, Avendus Wealth Management.
For many HNIs it is a psychological feeling that they may otherwise miss out on the seemingly easy returns from start-up investments. But, remember that unlike the stock market, in this case either you succeed and multiply your investment or you lose the entire money. Broadly, some of the factors investors must check for include promoters' background, valuation, clarity on the business model and an exit route.
Proper scrutiny
Clear profit plan
Potential problems
Back-up
Go via angel networks
Avoid crowd-sourcing
In the past three-four years, there has been a lot of support from high net worth individuals (HNIs) and angel investors for start-ups. This has helped new ideas and younger founders, and will drive innovation in this space. But the advice for investors remains the same – be disciplined and don't place blind bets, Banka says.
Curated from Are you down with start-up fever? [Business Standard]
Are you down with start-up fever? [Business Standard]
