Finding a great startup to invest in isn’t something that happens within minutes. Even if you manage to find some information about successful startups, you’ll most likely find that these companies are no longer looking for additional investments.
The best option available nowadays is using data to discover startups, this way you will know about the best deals right away and can explore the startup details before jumping head-in first.
What data points to review when investing in a startup
Choosing an ideal startup for your investments is hard and often becomes even more confusing when you try to apply data. Big loads of data can be overwhelming and confusing, and without a strategy, you can simply mix it all up. To make sure you are analyzing the correct data about your potential startups make sure you focus on these main data points:
- The product/service. One of the most important things to look at is the product or service the startup is offering, it should be something unique to produce interest, but at the same time something reliable so that more customers purchase it.
- Scalability. As a startup investor, you should examine the scalability of the company. For example, how they will react to company growth and how are they going to manage an unsuccessful project.
- Market time. You must analyze how long a startup has been in the market and how its data changed during that time. It’s important to know this because failure is most common for startups during years two through five, with 70% falling into this category.
- Team. Find out the team standing behind the startup, research their history, and if they have anything to do with previous successful or failed startups.
- Funds. 82% of successful business owners admit they have the right qualifications and backed-up experience to run a company, even with limited cash flow. Make sure that the startup has enough funds to carry through with a good idea.
- Startup plan. Before final investment considerations make sure the startup company provides an approved plan, realistic predictions, estimated costs, and profits.
Ways to Incorporate Data to Spot Startup Potential
Now that we have defined what data points you should look for when analyzing startup data, let’s have a look at how you can use these points to identify potential.
Review Risk Migration
According to stats, 2 in 5 startups are profitable, while others will either break even or continue to lose money. Many of these breaking points can be spotted early on when you have the right data and tools to predict risk migration. This involves substituting certain variables in a formula (business, product, market, etc.) and reviewing the outcome.
Use data to act fast
Having data at hand when reviewing startup opportunities is a huge time saver that can earn you a great deal before others have a chance to battle. A great startup investment opportunity won’t stay on the market long, so you must make quick data-based decisions.
Analyze macro trends
Once you have collected enough data about a startup analyze how macro and micro trends will affect the startup. For this, you can use startup datasets combined with data about market trends, customer acquisition, user retention, and revenue numbers.
Evaluate returns from investments
After determining the startup break points and its reaction to trends, if all results determined are ideal, asses the actual returns from investments. Even with a high probability of success, many factors can influence the actual returns of investments, so considering them all, determine whether it is a worthwhile opportunity.
Conclusion
With the rise of startup opportunities, data has become even more of an essential tool for investors who are navigating the startup landscape. The landscape can be rough, steady, smooth, and even downhill, but the only way to determine its terrain is by running through all the data you can find.
