Investing in startups may be trendy, but is it right for you?

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The power of the small startup business is perhaps stronger than ever before. Many startups in Georgia owe their success to the backing of devoted investors who believe in their business models. While investing in a small business or fledgling startup can be quite rewarding, it is not without its risks.

Startups generally have two options — thrive or fail. It is not always easy for investors to discern which startup has the most promising premise, especially when media coverage tends to sensationalize or overstate certain aspects of startups. Before settling on any one startup to back, investors should take their time and engage in hands on research to ensure that they can count on a solid return.

Why research is important when investing in startups

Take all of the media buzz, for example. The California-based startup Theranos promised to revolutionize the blood-testing industry, and the media grabbed hold of this news and ran with it. What many investors outside of Silicon Valley failed to notice was that none of the typical investors in the area would have anything to do with the business. News later broke that most of the hype around Theranos was just that — hype, and nothing else. Investors lost out big time and the company is still, years later, making news because of the scandal.

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Choose a startup plan you can bank on!

Since investing in a startup can be quite different than other more typical investments, it is important to dedicate a significant amount of time getting to know the startup, its founders and its business model. For instance, a Georgia-based startup might look promising, but upon meeting the owner, the future of that business might seem less than ideal. Ultimately, investors should carefully survey their own investment needs and weigh them against the possible returns of a startup investment before moving forward with any decision.

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