Here are two important red flags for start-up investors:
1. If the deal page mostly focuses on how great the sector or industry is, beware! The focus of the deal page should be about why this specific start-up company is great and not about why the industry is. You want to invest in start-ups because they’re great companies. Being in a great industry can help and is not generally a bad thing, but it also means most-likely that their is a lot of competition.
2. Pay attention to when the startup was founded. Generally speaking, the longer it’s been around without making major progress, the greater the risk. If a company has been around a few years and still doesn’t have significant revenue or traction, it’s often not worth investing in. Th least you should ask yourself “what has changed?”!
Sven Franssen