Startup Investing is not what it used to be. But this is great news if you want to be a startup investor in 2020. It means you can now become a member of the startup investor community more easily than ever.
We'll show you how in just a moment. First, take note of what's changed...
Last month, GeekWire reported that a VC firm had invested in a startup without even meeting the founders in person. Version One Ventures made a $2 million deal with Seattle-based DemandStar completely via Zoom.
Let that sink in... a $2 million exchange. No in-person meeting.
That means no coffee, no lunch, no beer, no handshake. Thanks to COVID-19, all of the classic business niceties are out the window.
This can be a harsh wake-up call for many experienced startup investors. The coronavirus has, at least in the foreseeable future, put an end to the social aspect of business culture.
Businesses like Version One have been forced to improvise. And it kicks the door wide open for new startup investors...
Why Investing in Startups Is Different
Boris Wertz, founder of Version One, said his company spends more time on the pitch process with founders now. This is to make up for the lost interaction of in-person meetings.
Wertz admits it can be hard for startup investors to "get to know an entrepreneur through Zoom." He also says there is much less "fear of missing out" in the time of COVID-19. It can be harder to make an early investor feel they have a big opportunity on their lap.
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One benefit of this, however, is that startup investing is more based on merit than before. Limited to virtual meetings, early-stage investing is less founder-centric. The startup's concept and business model will carry more weight than a few solid in-person interviews.
For this reason, VC firms are taking longer to fund startups. They need more time to look at the data and interact with founders via video to make a good decision.
The big, smart money is stalled by COVID-19. And that gives individual investors a huge advantage.
Here's why all this could make it easier for anyone to invest in companies before they go public...
- As Boris Wertz implied, startups are less enticing to early-stage investors without in-person meetings. This creates more opportunity for others to invest in any of 300 million new startups created annually. We're going to show you how in a second...
- Without the in-person social element, startup investors are more focused on merit. The market will create new ways to predict startup success. There will be more precise methods of interpreting business models, financials, etc. In theory, individual investors could become nearly as informed as VCs and angel investors in their decisions. Angel investing communities are already out there exchanging information...
Simply put, if better-connected, wealthier startup investors are forced to operate strictly online, it puts them on nearly the same level as everybody else.
But here's the gamechanger most people still aren't aware of...
How to Become a Startup Investor in 2020
Yes, COVID-19 eliminated the in-person meeting. But pre-IPO investing was already made easy in 2012 with the Jumpstart Our Business Startups (JOBS) Act.
The JOBS Act allowed for startups to be crowdsourced by individual investors holding fractional shares. There was no longer the need for a deep VC wallet. Anyone could start profiting from a company in its early stages.
So, eight years before COVID, you already had the opportunity to become a startup investor from home. And now that the playing field is even more level, there has never been a better time to start angel investing.
You don't need millions to begin. You just need to know how to separate the winners from the millions of startup companies popping up around the world.
That's what makes the Angels & Entrepreneurs Network such an important resource for individuals today. It puts them in league with some of the most formidable early-stage investors on the planet.
This is how you get started as an angel investor from home...
How to Look for Low-Cost, High-Potential Opportunities Outside the Stock Market
In this kind of financial turbulence, we recommend you pad your portfolio with opportunities that live outside of the greater markets.
That's why we've brought in these two experts to show you the ropes.
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About the Author
Mike Stenger, Associate Editor for Money Morning at Money Map Press, graduated from the Perdue School of Business at Salisbury University. He has combined his degree in Economics with an interest in emerging technologies by finding where tech and finance overlap. Today, he studies the cybersecurity sector, AI, streaming, and the Cloud.