Today, there are people with money and there are investors. Rather than use their money for their own pleasure, investors use their money to increase their wealth. They use what they have to acquire things that will give them a profitable return.
If you want to be a successful investor today, it is important to build up your portfolio. Thanks to advances in information technology, investors today have a wealth of investment opportunities online. According to data released by the US Commerce Department, e-commerce accounted for a total of $341.7 billion in 2015. This was an increase of 14.6% from the figure released in 2014.
Why invest in an existing online business?
The online world promises great returns with little financial input. The overheads in online commercial entities are minimal. These businesses also offer lower risk and greater flexibility for investors. Investing in an existing online business is also a great way to start earning money faster as the business is already making money.
If you’re getting started in investing in online business, you may be asking several questions. How can you invest? Where do I find online startups that have been put up for sale? How do I know which business to purchase? How can I ensure that my online business portfolio is balanced?
Before you get started
In the past, angel investment was something limited only to the high and mighty. You’d have had to have some serious money to access the market. Today, there barriers to investing in online businesses have been reduced. There are online investment platforms that provide potential investors with instant access to a wide variety of companies that are up for sale. These platforms even go a step further to provide standardized contracts.
There are many investors looking for startups with potential for good earning. You can easily find startups with potential on these online platforms and become an angel investor. The following tips will help you become one of the successful ones:
1. Write off your investments
Experts say that 3 out of every 4 startups fail. This means that 90% of the businesses you see on online investment platforms have a chance of not making adequate returns.
Although online businesses are making big money, the industry as a whole is still in its infancy. Furthermore, the industry is so dynamic that things can change in a matter of months or even weeks. As you begin to build your online portfolio, it is important to understand that there is a high chance of failure in investing online.
You should therefor invest money that you can do without. Invest only that amount that you would be willing to write off should the business tank. You should then mentally write off your investment.
2. Get an education
No, this doesn’t mean you have to go back to school to learn about investing and business. It simply means you need to learn about investing in general and the lingo that surrounds it. You need to understand the mechanisms involved in investing in online startups.
You may need to find someone who can explain it to you or search for online resources from which you can learn. Once you’ve mastered the basics, you will need to move on to the specifics. Learn as much as you can in order to understand your investments and know which investments would be most profitable.
3. Perform due diligence before you make that investment
You may come across an opportunity that sounds great and be ready to invest in it right away. Hold off a bit. Don’t rush into the investment even if you’re extremely enthusiastic about it. When you begin to feel excited about investing in a business online, this is the right time to slow down and look at the business once again.
You’ll need to consider various details about the business including:
- The company’s debts
- Whether it has shareholders
- Who are the founders and if they are still active shareholders
- What agreement is there with the shareholders in case of liquidation
- Are the URLs or IP addresses the company uses owned by the company
If you’re not familiar with these terms and other issues related to running online businesses, you may have to get professional assistance from a lawyer. It is also a good idea to rely on your network for information on such opportunities. You may have to expand your network and begin talking to other investors.
One of the best and easiest ways to get information about the company is from the company itself. A good startup will have an info memo or some other document that contains answers to all the important questions.
4. Ensure stable information flow
When you invest in shares, you will ensure to check the stock market on a daily basis for the latest news. A similar and more hands-on approach is required for investing in online businesses. Ask the startup to send you updates of their activities and returns every month. They should be ready to ask for advice, support or even provide introductions and you should be ready to provide support when needed.
You can ask the company to begin sending you reports even before you invest. This will help you determine if you’re comfortable investing in that particular company.
5. It’s for the long haul
If you’re in it for quick money, you’d better not even attempt to invest. If you want to invest in an online startup you should be prepared to develop a long term relationship with the business. This means that you should be ready to be an ambassador for your company. You can only make substantial returns from a business by sticking to it for the long term.
6. Diversity is key
While you should invest in a profitable business that is in an industry that interests you, it is important to spread your portfolio. Don’t put all your eggs in one basket. Commit some money to between 5 and 10 other companies in other industries. As you increase your profits you can continue to follow up with the investments you made in your favorite companies. You have a greater chance of success with a diverse investment portfolio.
7. Don’t go it alone
There is a steep learning curve when it comes to investing in startups. You can make it easier on yourself by asking for advice or attending investment meetings or trainings. Here you can meet with like-minded people and learn from their experiences. You increase your chances of success with a fresh pair of eyes looking at your investment portfolio.
You don’t have to be extremely rich or experienced to be successful at creating and building a successful online business portfolio. You’ll learn with time to identify those businesses that are worth investing.