Why You Should Not Invest in Start-ups?
Every now and then, I get a request to consult for an Angel Investor who is looking to make it big fast by advancing some capital to some group of creative entrepreneurs.
The pitch from the creative entrepreneurs usually goes like this: “We are on the verse of going public or getting bought out because we have the best invention. It is like ….” And they site a hugely successful company like Amazon, Starbucks, Facebook, etc.
The so-called “opportunity deals” vary from technology-based concepts to other unique industries and applications with products that could supposedly improve our daily lives.
My advice to these investors on 99.9% of the opportunities is almost always the same: “Avoid this at all cost”.
Let me give you the basic 3 steps formula for investing your money:
- 1. Place some capital in safe assets that first and foremost preserve your capital. (Right there this first point eliminates most of these product startups)
- 2. Make sure the assets will produce some cash flow to beat inflation and get some income. (This would narrow your focus to mostly real estate assets)
- 3. Finally, you must have some kind of liquidity. (That means you should be able to get out within at least one-year maximum if you need your cash without loss of your principal)
Leave the Angel investing game to the venture capitalists that have more money, experience, and an army of experts that literally take over control of the companies they invest in.
If you do not have the knowledge and accept the responsibility for the results, then you will not be in control. We can help you at [email protected] or you may just be better off investing your money in real estate assets whether directly or through specific funds with Fund Managers who have a reliable track record.
Sincerely,
Cherif Medawar
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