| Invest in what you are comfortable with |
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| If you have experience in a certain domain, and know how things work in that domain, it’s best to pick out entrepreneurs working in that area. You can bring your domain expertise to the table and can make the right judgments on whether the entrepreneur is going in the right direction. However, you can keep an open mind about other opportunities as well and analyze which entrepreneurs have the most viable business model. |
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| Get to know the owner |
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| Most small businesses grow by sheer passion and force of the owner. You must spend time getting to know the owner, and become comfortable with the person before you decide to invest in his/her business. Look for passion, the right skill sets and temperament, leadership qualities, vision and integrity. Without these, a good business idea can reach a dead end. |
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| Higher returns, but higher risk too |
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| Funding a startup involves a lot of risk as you are primarily betting on a person or a team to deliver on a great business idea. Anything could go wrong and make your investment vanish. But if it goes right, you will end up with unbelievable returns. So make your decisions very carefully. Do not be swept away by persuasive talkers. |
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| Are the numbers correct? |
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| Most business plans have detailed numbers and how they are going to be achieved. Make sure you pore through every assumption and every number so that you know that the information provided is correct. Do your due diligence properly. |
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| Win/Win Deals |
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| No deal can work if one party stands to gain disproportionately more from it. Work out deals in which each party gains, and there are no losers. The minute there is greed in the deal, things are likely to fall through, or bring distrust into the picture. |
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| Get it in writing |
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| Put all the expectations, and other aspects of the deal in writing; with advice from your lawyers. Do not leave any aspect to imagination or assumption. It is absolutely critical to ensure that you and the entrepreneur you support clearly understand every aspect, so that later there are no issues. |
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