How to invest in startups?

Financial well-being is one of the main goals in every person’s life.


Everyone wants to live comfortably, but how to achieve this? Opening your own business is a good idea, but you don’t always have time to do it. Plus, sometimes you don’t have enough strength and knowledge, so it’s worth considering alternatives.

How to invest in startups? New companies in need of financing are suitable for profitable investments.

Once upon a time, Google also needed investors, but now it brings huge dividends to shareholders. Just imagine what would happen if you managed to help such a large company at the stage of its inception.

Is it profitable to invest in startup projects?

There are so many people, so many opinions, but if you invest in a promising business, the profit will be huge.

This is where many rich people started, they saved up a significant amount and used it to develop someone else’s company. When they unwinded, the funds were returned in several multiples of the volume.

There are many examples of successful investment in companies; Facebook, for example, attracted huge investments at one time. Although there have been unsuccessful projects, it is therefore necessary to carefully select entrepreneurs under whose management the finances are put.

For an investor, investments in startups are highly profitable, but they are not without risks. However, any investment method is associated with risks in one way or another. Nowadays there are various funds and companies that attract several investors at once. This allows you to start with a small amount.

Investing money in a startup - great decision!

Together we collect the necessary amount to implement the project. To make it easier to find investors or startups for investment, a project was created. This is a serious startup exchange, where many investors are registered:

Abroad, this method of business financing is more developed, therefore there are several times more projects for the relationship between investors and startups.

Of the most popular, it is worth highlighting and. One manages to find through these systems best options for investment, others receive financing.

Everyone knows that foreigners launch more often interesting projects and ask for help from investors.

If you have at least some amount, switch to foreign projects and look for suitable options. Entrepreneurs from the United States have a much better chance of reaching the global stage and achieving maximum success.

Where to invest in a Russian startup?

In Russia they are not so actively investing in new companies, but why? Because people do not believe in easy money and are afraid of the deception that we are all surrounded by. Indeed, when you don’t know exactly what the money will be used for, you don’t want to part with it.

There are also special services in RuNet, where investors and startupers find each other:

1. is a crowdfunding company that offers investments from 100,000 rubles for a period of 30 days.
2. - a similar project, there are also plenty of proposals for it.
3. – the most popular crowdfunding project, there are the most startups for investment here.

All these services are designed to collect money from several investors. Crowdfunding helps businessmen raise a lot of money without having to look for just one rich person. If you are serious and would like to invest large sums in startups, use special clubs:

1. – to start you will need to deposit at least 25 thousand dollars.
2. - a club of investors whose capital exceeds $250 million.

Lately, many successful entrepreneurs have been asking me this question. It has become difficult for people with a capital of several tens of millions of dollars to invest their savings with normal returns. At the same time, your business is successful and does not require investment, and it is not always possible to buy competitors or players from related segments. Plus there are problems with geographic expansion abroad - the business is traditional. Popular option with high profitability and a convenient form of interaction is co-investment with venture funds and firms.

The majority of successful entrepreneurs in Russia are people between 35 and 50 years old. Public interest in peace high technology and bright success stories attract many people to this segment. What attracts us is not only the opportunity to earn money, but also the still-still interest in business, the dream of creating a high-tech and comfortable future together.

If you don’t have much money and are not afraid of the high risk of losing all your invested funds, you can try your hand at seed investments.

Become an angel

The simplest and most obvious way in this case is to become an angel and invest small sums in startups of acquaintances and just people from your circle. They will certainly come for investments after learning that the entrepreneur has become an angel investor.

According to the National Association of Business Angels (NABA), there are about 2500-3000 business angels in Russia. Of these, probably only 10% are active. This is explained primarily by high risks and a lack of practical knowledge: what principles should be used to evaluate startups, where to start negotiations with founders, how to calculate the amount of investment that startups require, and under what conditions.

Most angels will not be able to return their investment unless they do it professionally and a lot.

Simple venture arithmetic shows that if the portfolio contains less than ten startups invested at the earliest stage, then the probability of making money is like a lottery. Well-known American in the column “How to be a business angel?” says it's not hard to just find a pipeline of projects - it's important that they are high-quality startups. Where to get enough projects to select 10 promising ones? The easiest way is . Even though they are at an early stage, projects are trying to be visible in the public sphere. Plus, a number of specialized media outlets constantly produce one or another selection of interesting projects.

But it is difficult to analyze the volume of publicly available projects - good skills are needed to separate the wheat from the chaff, and without personal communication it is almost impossible to identify a truly interesting business from the mass of applicants for investment. According to our statistics, 80% of high-quality projects come to our LETA Capital fund precisely on the recommendations of angels, incubators, accelerators, associations and universities with whom we communicate and work.

Check your intuition

If you want to start investing, then you can easily allocate $10,000-20,000 and confirm the level annual income and “play around” by distributing the money to 10-20 projects on crowdfunding platforms. On the international Angellist or Russian StartTrack, for example, you can choose projects in which investors you know well or people with the required specialization invest in.

At the same time, there is no need to pay management fees that are required in the fund; transactions are made quickly and online. For an additional success fee or reward for success, investors who have already invested in the project, on the one hand, will help you not get involved in an adventure, and on the other hand, you will be able to test your intuition and analysis. Investments there are structured extremely simply, such projects publish reports. This is one of the most inexpensive ways to try your hand at investing and understand a little about this world.

Even our experts periodically personally invest tiny amounts through crowdfunding platforms in iconic startups in different countries, mainly in the USA. Rather, in order to have an idea of ​​what is happening in the market. But this form of investment, like angel investing, has very high risks - there are no guarantees that the startup will take off. Diversification of investments is the basis of venture strategy: no one has canceled the rule that 80-90% of startups go bankrupt. With such risks, you must be prepared to lose all your money. And all professional consultations on project verification again incur additional costs.

Taking risks together

The third working and popular option is syndicates in the early stages. They exist with both crowdfunding platforms and seed funds. This way you can conduct syndicated deals together with Angellist or choose someone from domestic investor clubs. If there are high risks at the seed stage, this option provides access to higher-quality startups. Both syndicates and clubs reduce risk by allowing you to invest with professional investors. Of course, this will cost you additional costs - usually administrative and legal fees, tax fees and reward for success.

Transfer responsibility

With a check of $1 million you can contact venture fund, investing at an early stage or at the A round stage. One fund allocates investor funds into 10-15 portfolio companies over 2-3 years, so diversification will be optimal. Advantages of a limited partner or limited liability partner in a classic venture fund: it already has its own team of experienced experts, analysts and pipeline projects. To invest with the fund, you will have to pay a management fee - it must be paid regardless of the result; you must be ready to put the entire investment amount in advance for a period of at least 5-7 years. In addition, such partners have almost no involvement in the life of the fund and startups, both at the stage of their selection and in the future.

Learn to invest

Another way to become an investor at stage A, while gaining more freedom in decision-making, involvement in the process and low risks, is to participate in a transaction as a co-investor with the right to independently choose a project for investment. The advantage of such co-investment is that the investor does not pay any management fees; the fund itself conducts its operating activities. Money in the fund is not frozen, and most importantly, the investor himself decides which deal to join and which not. If the investment returns, the investor will only have to pay a success fee. Usually around 20%. At the same time, a guarantee of the quality of a startup is the investment of the fund simultaneously with the investor. That is, the fund co-investing with you risks its own money, and does not just give recommendations on where to invest. This means that the fund’s experts conducted an examination of the project and interviewed the founders, checked their business plan, and this information is available to the investor.

Several investors cooperate with us, who co-invest, but at the same time leave all the preliminary work and subsequent representation of their interests to the employees of LETA Capital. These are experienced entrepreneurs, selected by us not only from the point of view of financial solvency. They also play the role of experts and advisors in cases where their expertise is needed by portfolio companies, their feedback useful in decision making. At the same time, a startup perceives a group of investors as a single structure from the point of view of coordination and decision-making and other bureaucratic procedures; difficulties with this usually do not arise.

I think that in conditions when money in a classic fund lies for about 5-7 years before liquidation, the fund has strict rules, access to best projects will have teams that are fast and flexible in decision-making. Therefore, more and more novice investors are interested in participating in the latter type of transactions. They provide more freedom, require less time spent on bureaucratic procedures, require only rewards for success and are carried out at a lower level of risk.

We get asked every now and then about how to start investing in venture capital and where to look quality projects. This is of interest to both individuals with accumulated capital and large companies thinking about introducing innovations. It seems it's time to tell everyone about it.

Rusbase often acts as a project search operator for investors of various types. In 2015 alone, we selected projects for QIWI Venture, Sberbank Insurance, GLONASS and a group of investors in b2b services. We also do this all the time as part of our online service Pipeline, which helps investors and entrepreneurs find each other.

Of course, we are not the only ones who do such things. But, as a media and networking platform, we know venture players and startup search tools well. That’s why we get asked every now and then about how to start investing in venture capital and where to look for quality projects. This is of interest to both individuals with accumulated capital and large companies thinking about introducing innovations. It seems it's time to tell everyone about it.

How can you invest?

The choice of investment method depends on how much money you are willing to invest in venture projects and how much time you can spend on them. On the website, Managing Director of Prostor Capital Alexey Solovyov points out five ways to become a venture investor:

1. Invest through crowdinvesting platforms- platforms for collective private investments with the aim of making a profit. This differs from crowdinvesting to crowdfunding, where successful investments only give you prepaid goods or some privileges (for example, discounts).

With crowdinvesting, the investor receives:

• percentage of project income (this model is called “royalty”)
• return of the invested amount with interest (this model is called public lending)
• share of the company (this model is called equity crowdfunding)

Crowdinvesting is convenient for beginners because it allows you to invest small amounts of money at once in a bunch of projects and gain experience. On the other hand, there is a high risk that crowdinvestment projects will be unprofitable or not implemented at all. In addition, in Russia the legislative framework for crowdinvesting has not been developed - the rights of investors and the responsibilities of the investment object are not fixed. The only option for crowdinvesting in Russia is participation in the company’s share capital. For example, the investment pool of one project includes 10-15 people.

Of the domestic crowdinvesting platforms, perhaps the most famous are:

• StartTrack (works as an information service for investors, but recently launched a public lending model, which allows you to invest in Russian startups from 100 thousand rubles for a period of 30 days).

The project manager of the crowdfunding platform Planeta.ru, Petr Vyrupaev, wrote that the target audience of such sites is the middle class, who have saved from 100 thousand rubles to several million. According to the SearchFunds platform, our crowd investors invest on average from $1 thousand to $7 thousand.

Also, novice investors can try the model. For example, the domestic platform “City of Money” brings together private investors and borrowers (small and medium business). The company’s specialists evaluate projects before adding them to the database, checking them credit history and solvency. You can invest amounts from 10 thousand rubles for a period of six months to 3 years. The agreement is concluded directly between the investor and the borrower. Average rate for the investor - 35% per annum.

2. Become a business angel- that is, regularly invest in early-stage businesses for equity or convertible debt (this is where the investor receives a “discount” on the purchase of shares in the next round). Angel investment amounts typically range from $50,000 to $300,000. Angels support startups at the business idea level and those that already have a product prototype. So the risks are very high. To diversify them, you need to finance 10-15 projects, which assumes a sufficient amount of capital. In addition, a business angel must understand the chosen niche in order to competently evaluate the project, and have sufficient experience to influence the development of the portfolio company. If these conditions are met, venture investments can bring him decent money.

3. Invest through investor clubs- the investor indicates his preferences to the club, which looks for a suitable project and organizes a transaction for which it receives a commission. The money remains with the investor until the documents are signed, he controls everything and at the same time spends a minimum of time. Clubs are very convenient for co-investment: a novice investor can enter a good project with a small amount. However, there is a risk that in pursuit of the number of transactions, the fund may lower the bar for selected projects.

Rusbase collects such communities on a special page, but now recommends the following:

What types of investors are there?

This division is quite arbitrary, but Rusbase uses it as a kind of basis. Depending on their background, investors can be divided into:

• novice investors (for whom this article was written)
• professional private investors (or business angels)
• representatives of investment funds (this may be a managing partner, partner, investment director, analyst, investment analyst),
• representatives of corporate venture funds (including heads of investment departments and R&D centers of corporations)
• strategists (these are representatives large companies that are absorbed by the young technology companies For innovative development or diversification)

Where to look for startups?

Unless you join more experienced investors within a club or investment company, you will have to look for projects yourself. Famous goes to funds an endless stream of letters from entrepreneurs. And if no one knows about you, where to find interesting startups?

1. Register as an investor in startup databases, where you can sort projects by niche. This allows you to significantly optimize the search: project descriptions are usually well structured (unlike letters from inexperienced founders) and undergo at least minimal moderation (its strictness depends on the policy of the resource). In addition, this format makes it easier to compare projects.

2. You can take educational programs for venture investors , For example:

We inform Pipeline participants about new educational programs and also collect all current courses.

3. Subscribe to thematic media- Rusbase, vc.ru and Firrma. Roem and The Secret of the Firm also periodically write about venture investments.

4. Watch video tutorials from Venture Kitchen is an educational project of RVC and HSE on the Rusbase platform, which was created in 2013 as a knowledge base for novice investors.

One of possible ways receiving passive income are investments in business, in particular in startups. Startups are new (innovative) financial projects whose goal is further development and profit. The difference between a startup is the use of new technology that no one has used before.

With the right choice of project, investments require a minimum of effort and can provide stable profits for a long period. Contrary to the opinion of many, for venture investments you don’t need millions, you can invest several tens or hundreds of thousands of rubles, both in your own and in other people’s business ideas. The main thing is to choose a promising direction and an active development team.

You are an active team and your project requires financial and legal assistance? Admitad Invest investment fund will help money, experience, marketing in exchange for a share in the project.

Pros and cons of investing in startups

What are the advantages of investing in startups?

1. If the project is implemented and develops with proper management, the investor will receive the right to participate in management and have a share of the profits.
2. You can invest a small amount, since at the beginning of implementation, as a rule, the costs are not very high. You can then buy out the shares of other investors and debtors, increasing your participation.
3. To invest, you do not need to have a lot of economic knowledge.
4. The ability to choose the field of activity that is most interesting.
5. Minimal investment will result in large income in long term if the business develops.

Cons:

• High risk of losing all invested funds.
• Unforeseen situations that may reduce or eliminate the effectiveness of investments.
• The likelihood of disagreements arising (if there are several investors), their withdrawal from the project and a decrease in its profitability.
• Instability of income from investments due to uneven development of business and the economy in the country.
• May be required additional investments in the process of implementation and scaling.
• Profit is only possible in the long term.

Investment sites

Several platforms have been created on the Internet where you can get acquainted with projects that need financing, invest in them, or post your business idea in order to interest investors in its implementation. Platforms for investing in startups, such as startupnetwork.ru, business-platform.ru, also post materials for the economic self-development of investors.

There are many other sites offering online services for finding investors or projects for investment. The most popular of them can be found in the review on the portal promdevelop.ru.

There are also international platforms for crowdfunding startups, for example, Kickstarter, IndieGoGo, GoFundMe, Crowdfunder, RocketHub, and others.

The usual average development time for startups in the world is from six months to eight months. The project is no longer expanding; it is being closed. In Russia, such projects can continue for years, sucking all the money out of investors and startup teams. They gradually turn into hopeless and unprofitable. Choosing an active team and a direction that is in demand by society is therefore very important.

Startups that are promising this year

Best startups 2019 in Russia and beyond have recently been in the areas of artificial intelligence, robotics, marketplaces (e-commerce platforms), and financial technologies.

In 2017 received support from:

• Fscorelab scoring system (assessing the creditworthiness of borrowers);
• TalkBank program (identification of bank clients through chat based on communication style);
• CPS LAB sensor, which determines the efficiency of employees, as well as their working conditions;
• CrocoDie system, which determines the location of the nearest tow truck if the car is parked incorrectly;
• Cappasity - the use of 3D technologies in online promotion of goods.
• Replika from Luka. The program allows the user to create a virtual copy of themselves. She studies the user's interests, his style of conversation and is then able to replace him in communication with business partners and friends.
• Wikium is a brain simulator that works according to criteria selected individually for each user. It's clean Russian project, useful for schoolchildren, students, elderly people and others who want to develop their mental abilities.

Investments in these projects may be promising this year as well.

New ideas for Russia

Promising ideas, presented in January for a startup at the CTS-2018 exhibition (Las Vegas), were focused mainly on the development and use of touch gadgets: laptops, subwoofers, bracelets, smart umbrellas, combs, headphones and much more that can generate profit. For Russia, it is important to introduce other innovative ideas that have become popular and successful in other countries:

3D printing

The use of 3D printing in the food and confectionery industry in the production of not only toys and souvenirs, but also cakes, figurines for decorative decoration of cakes, sweets, fancy pasta and much more. The products will be in demand in cafes, restaurants, confectionery shops, event organizing services, etc.

Coworking centers

This is a new format for communication between people outside the home. Here they can work, meet and socialize from a few hours to a full day. The idea was developed abroad in 2016–2017. To organize a business, you need to rent a suitable premises, equip it, and hire staff. The first one to open the center wins.

Thermal transfer film

The essence of the idea is to use thermal transfer film in the manufacture of clothing by fixing it to the fabric with a press or a hot iron. You can cut out figures from the film, apply drawings on it, etc. Sales of this film, decorative elements made from it, tailoring and sale of products are promising.

Hotel for indoor plants

In Russia it has not yet become widespread, but the service of such a hotel is in demand. A business for those who know how to care for plants, loves and knows them, is able to provide everyone with comfortable conditions. An apartment will do, private house, greenhouse, rented premises. Additionally, you can provide treatment, health improvement, plant replanting, bouquet arrangements, sale of fertilizers, soil, pots, etc.

Alternative energy sources

There are quite a lot of similar business projects. Their successful development largely depends on the position of the state. Businesses may be interested in coatings that accumulate and convert the mechanical energy of pedestrian steps into electrical energy. For example, in the USA and Japan they use Pavegon paving slabs, which generate electricity from pedestrian steps. A project can be successful in big cities, but it depends on the attitude of the authorities towards the business idea.

The modern world is obsessed with startups, and this is understandable - stories of dizzying successes excite the imagination. Sometimes it may even seem that companies manage to successfully step from the coworking segment into the class of the business elite, whose project funding amounts to millions. Of course, this is not true, but something else is obvious - investing in startups in Russia online is a very promising area. More details below.

Investing in startup projects today: features

When starting your own business, any entrepreneur wonders where to get the money. There are different options - they look for investors through their connections in the “real” (that is, offline) world, go to an “incubator” or apply to a venture fund. But the most modern option is one that brings together startupers and investors, significantly simplifying the process of interaction between them. Simple online search or database of startups for investment– it’s convenient for everyone. Why?

Firstly, it’s not necessary – it’s enough to make a good profile and wait for it to be approved. If the acquaintance is successful, the deal is concluded in the usual way. Secondly, the parties enter into mutually beneficial deals. After all, if you are an investor, you are interested in promising startups, and if you are a startuper, then you are looking for an investor. And the easiest way to do this is without leaving home.

Investment schemes

The choice of scheme depends on the financial capabilities of the investor and how much time he is willing to spend working with the project and waiting for profit. Possible options:

1. Invest money through crowdinvesting platforms– that is, collective investment platforms created to make a profit for their participants. This is the main difference between crowdinvesting and crowdfunding (in the second case, only various privileges such as discounts, loyalty programs and paid goods can be useful for the investor). As part of crowdinvesting, investors receive:

• royalty (percentage of the startuper’s income);
• invested money with interest (the conditions of public lending vary);
• share of the company in whose development they are investing (equity crowdfunding).

What is good about crowdinvesting? This model is ideal for beginners. They can invest money in several projects at once, thereby minimizing the risks for each individual project. On the other hand, one cannot write off the high risks of unprofitability of the project in which the money was invested. And also – crowdinvesting legislative framework not in Russia, which entails certain risks. Is it worth investing in a startup?? Yes and no – but you definitely need to know about the pitfalls. The most famous domestic crowdinvesting platforms are StartTrack, SearchFunds, MyPIO.

2. Become a so-called business angel– invest money in a young business for convertible debt or a share. The size of such investments varies greatly - from $50 to $300,000. support startups from a series of business ideas; a product prototype is required. The main disadvantage of this scheme is not just high, but very high risks. But if an investor understands the chosen niche and knows how to assess the prospects of projects, then he can make very good money.

3. Act through specialized clubs– the investor selects a club, voices his preferences to the representative, and he then selects a deal that will satisfy his needs. The money is kept by the investor until the contracts are signed; minimal time is spent organizing the transaction. Clubs are an ideal option for co-investment, since they allow an investor to enter into a good project even if minimum amount money on hand. The main disadvantage of the scheme is that the fund can select projects carefully or not very carefully, depending on the working policy and the desired number of transactions. We recommend taking a closer look at the clubs AltaClub, Skolkovo, Smart Money Club, SmartHub, Moscow Seed Fund.

4. Transfer assets to the venture. Professional, multi-stage selection of business projects is a guarantee of minimal risks; in addition, an investor can enter a venture and successfully earn money even in the absence of knowledge, experience and time, or the desire to obtain them. The fund works with current projects (the investor pays a commission for assistance). In the West, this scheme is very popular; for Russia it is still quite new and not fully thought out. Also in this segment there is a high minimum threshold - it is 500 thousand dollars.

5. Start a fund– rent an office, recruit a team and attract 10 million American dollars(this is at least) investment capital. Having your own fund means high risks, maximum costs, but the profit in case of a successful outcome of the case will be very good.

Where can you find interesting startups? There is also a small choice - either register in investor databases, or regularly view open databases with current projects, or follow the finals of specialized competitions and accelerator releases. Startup exchanges are also a convenient option.

Startup Exchanges

On in simple language exchanges are specialized platforms on which all interested entrepreneurs post advertisements for their projects, and investors view them and select the most promising ones. There are many such exchanges today, and each has its own characteristics. So, some set the amount of contributions, others provide investors with lists of promising business ideas. Let's consider the largest exchanges and the conditions under which you can carry out investing in startup projects.

Napartner

Operating since 2010, it offers the most promising ideas. Moderation is manual, it is possible to view user ratings of certain startups.

Planeta

The official portal of global startups, a large selection of offers, affordable prices. Received many awards. It has been operating in Russia since the early 2010s.

Startupnetwork

Large venture platform. Investors can not only choose an offer, but also create applications with the parameters they are interested in, and entrepreneurs are looking for investments and selling unnecessary businesses.

Kickstarter

Well-known crowdfunding platform. Kickstarter aims to fund innovative technology developments, but other projects are being considered. In Russia, the functionality of the platform is partially available, moderation is carried out manually.

Crowdcube

The platform works with private investors without attracting venture capital funds. Each project is carefully checked by the system before being placed on the exchange.

IndiegoGo

The oldest startup exchange. The basic operating principles are standard. There are no geographical restrictions, all types of projects are considered, but a bank account is required.

Conclusion

On the market online investing There are different schemes and models for startups. Thanks to this, each investor will be able to choose the best one for themselves, and the startuper will be able to find money for the development of the project. The key to success in this case is a serious attitude to the matter and compliance with recommendations.