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Every time you turn on the television, someone is talking about the COVID-19 pandemic, a looming recession, and a global crisis. It's pretty unsettling, and quite frankly, downright scary at times.
If you're feeling unsure about where or how to invest your money right now – or if you even should – I don't blame you. It's clear that overall economic trends are anything but predictable these days, and we all want to do everything we can to hang on to our well-earned income and assets.
The markets will recover eventually, of course… but this early in the game, it's practically impossible to predict when that'll happen.
In short, there are plenty of reasons to feel nervous. Today, however, I'm here to explain why you shouldn't panic right now. Yes, things are shaky and uncertain – but as a potential startup investor, you're in a unique position.
Market pullbacks and recessions often create extraordinarily favorable conditions for startup investing, which means that you can still see massive returns on your investments.
But to pick the right deals, you need to have a plan… which is exactly why I'm here. My mission is to guide you toward the most lucrative opportunities and to teach you all of the strategies you'll need to make investment decisions with confidence.
Today, I'm sharing some of my best ideas for getting the most out of your investments during this global crisis.
Let's get started with the basics…
Tip No. 1: Understand the Basics
Now more than ever, it's crucial to understand the basics of angel investing before you even dip your toes in the water. Those who take the time to understand what they're getting into will find the most success and see the biggest returns in their investments – and that's true all the time, not just now.
What's most important to remember is that angel investing, even today, is one of the best ways to make money. If you're still not sure what an angel investor is exactly, let me explain.
An angel investor is a person who provides that first, crucial investment – also known as a seed investment – that a fledgling business needs in order to grow. Angel investors see the potential of big ideas and claim an early stake in that idea's potential success in the future.
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But what's unique about angel investing is that all of this happens way before anyone on the public markets can ever get their hands on company shares. As an angel, you're investing in a company before it hits the public market, which means that you're getting in on the ground floor before most investors.
This puts you in a considerably unique spot. You're not only getting to claim a stake of a company during its early stages – you're also setting yourself up for a greater chance of financial gain in the future. Think about it… you're investing in a company before anyone who opted to wait for an IPO. You've been there from the start – when the company was worth much less – which means that you'll potentially see a way bigger return on your investment over time.
You'll also be well-positioned to exit, or make a return, right as everyone else is coming in… taking those massive returns with you.
But in my opinion, the best part about angel investing is that you're not just there to make money and leave. As an angel investor, you have a real opportunity to make a significant impact on a company's development.
If you invest in a seed-stage startup, you're showing the company's founders that you believe in their business idea and that you want to help. Those founders can rely on you for direction and advice, and you can have a part in influencing how the company grows.
But, as with everything, you need to think realistically. Here are some things you should know before you invest a single penny.
Tip No. 2: Do Your Due Diligence
Let's face it: There's no shortage of good ideas out there. And that's pretty exciting… but it can be hard to separate the wheat from the chaff.
You need to know what to look for before you ever invest even one dollar so that you're not just jumping headfirst into every deal opportunity you see.
I've already mentioned how easy it is to get caught up in how incredible a startup's big idea is… but that doesn't always mean the idea will work out in the long run. One of the most important pieces of advice I can give you, especially now, is to always approach your investment decisions with an analytical, data-driven eye.
Millions of startups launch around the world every year, and there is no possible way that all will succeed. However, with the right tools and knowledge about what exactly you should be looking for, you can make well-educated decisions about where to put your money and rely on more than just your gut instinct to see those returns.
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Personally, I choose to invest in startups with a big total addressable market (TAM). This means that this company operates within a huge market – in the billions of dollars, at least.
Take biotechnology, for example. Biotech is a booming industry that's slated to hit almost $730 billion in just five years. Imagine investing in a company that grows to occupy just 1% of that market. That's huge – 1% of a $730 billion market is still $7.3 billion… and all of it belongs to that startup.
A company that's already making some money is a good sign, too. It doesn't have to be a huge amount of money, either. But if a startup can show me that it's capable of marketing and selling a product, that's a measurable indication of its future success.
The companies with the greatest success tend to be those with scalable business models. This means that they can easily handle an increase in market demands without necessarily increasing their overhead costs too much.
You should also invest in companies whose founders have a big vision that you understand and believe in. And last but not least… you should never invest in a company without taking a closer look at the deal terms.
Tip No. 3: Follow in the Footsteps of Seasoned Angels
One of the best ways to pick up a new skill is to follow in the footsteps of those who came before you.
This goes for everything – think about it. When you were a kid playing a new sport for the first time, did you just pick up the skills and immediately understand what to do by yourself? Chances are, you didn't. You probably had a talented and experienced coach to help develop your skills, until one day you found that you could do it all by yourself. And do it well.
Think of angel investing as your new sport… and us as your willing coaches. That's the beauty of angel investing – it really is a community, and we're here to build each other up.
It's also important to rely on successful angel investors and founders to give you the most accurate information on how best to proceed during economic crises like we're seeing today.
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For example, I recently sat down with one of my friends and the founder of Business Insights Group, Cameron Chell, to discuss how startups and investors should position themselves to weather the current market conditions. We talked about everything from what entrepreneurs and investors should – or shouldn't – do to sectors where we're seeing the most – and least – success.
It was an incredible conversation, and you can access a rebroadcast by clicking here.
It's so common to get caught up in the dream of making it big that it can be easy to lose sight of where you should be focusing your time, effort, and money. That's why it's so crucial to listen to those who made it before you and to learn everything you can along the way.
Tip No. 4: Learn Everything You Can
I'm a big fan of lifelong learning, and as with everything, one of the best ways to develop a skill is to consistently position yourself to get the best information possible.
The same goes for angel investing. We've already discussed following in the footsteps of already-successful angel investors, but there's so much that you can do on your own to enhance your skills as well.
To start, you can follow along with myself, my colleague David Weisburd, and the research team at The Startup Investor.
Just go here to sign up, at no charge whatsoever. To start, you'll get my expanded list of 10 tips for thriving in a down economy with the life-changing returns angel investing can provide.
What's more, you'll receive a twice-weekly free newsletter highlighting the best of the startup world and filling you in on everything you need to know to see the biggest return possible on your investments.
You can also visit The Startup Investor online to access tons of videos, articles, and other information about how to develop your angel investing skills. My team and I have worked hard to provide you with the best information possible so that you can stay ahead of the game and learn everything venture capitalists don't want you to know.
The more you know about angel investing, the better prepared you'll be to make the most lucrative investment decisions possible during today's shaky economic times. And the better prepared you are, the less likely you'll be to panic when the world seems to have screeched to a halt.
Which brings us to…
Tip No. 5: Don't Panic
This is easier said than done, but I really do mean it. With the right tools, we're going to get through this together and come out stronger on the other side.
I truly believe that it's within a startup's nature to weather a storm like this one – and those that do will make it to the other side leaner and stronger than before.
Keep up with us, and I'll show you how it's done.
In the meantime, don't miss my colleague Shah Gilani's presentation on the three stocks that belong in EVERY portfolio…
You see, Chief Investment Strategist Shah Gilani just named three stocks he says are "screaming buys" right now.
All three are trading at a discount; they're "under the radar" companies most people haven't even heard of yet. But each one enjoys a massive tailwind with the potential to make their prices skyrocket.