There are many great reasons to investing in early-stage companies: the chance of profitable returns, the opportunity to 'give back' and to mentor budding entrepreneurs, exposure to new innovations, and a front-row seat to potentially transformative new businesses.
But amid the excitement and potential comes the knowledge that investing in start-ups is inherently risky. Of course for many, that's part of the fun and the challenge - how to spot and nurture the most promising.
Experience teaches us that for every 10 start-ups, 5 or 6 will fail, 2 or 3 will just return your money or even just a fraction of it, and investors seek those 1 or 2 companies to see their profit. (add citation.)
So how can an individual increase her or his chances at obtaining the environmental and financial returns they seek?
One way is join with other investors to evaluate early-stage opportunities. Enter E8!
In a room filled with smart, curious, passionate people who share a common goal, the fun is almost guaranteed.
But how might E8 help reduce the risk?
Common sense, backed by research from the Angel Resource Institute, shows that there are some key steps investors can take to increase their chance of a positive return.
1. Build a diversified portfolio.
2. Conduct at least 20-40 hours of due diligence per investment.
3. Invest in companies where they understand the market and/or the technology.
4. Stay connected to the entrepreneur and the company after the investment.
Details this research and its conclusions can be found in The 2016 Halo Report, which summarizes ........
Still, knowing what you should do and finding the time and acquiring the knowledge to actually do it can be a daunting undertaking for an individual. In particular, this might eliminate intriguing companies from consideration simply because they lie in a new and unfamiliar market.
But when you evaluate companies and conduct due diligence in a group, you have access to the experience, skill set, and combined time of other investors.