Investing in early-stage businesses is not easy and knowing the market the business is operating in is key for any equity investor. We've broken down some of the most important things to look out for below.
Look at the industry in which your prospective investment is operating. What’s the size of the market? Has it been exhibiting growth year on year? How is the company performing in comparison to similar ventures in its sector? Is it likely to be able to grab a share of the market, and if so, what would that equate to? What’s the competition like?
As always, staying up to date with what’s hot with regard to sectors is key – you don’t want to invest in an area just as it’s plummeting. For instance, you might not expect to find that social media is currently coming down off its 2010 high and health tech is taking a dive, while for SaaS it looks like the sky’s the limit. There’s a lot of data out there, so use sites like Tomasz Tunguz to stay in the loop with what’s hot.
You can’t overestimate the value of experience
If you can invest in an industry where you have experience, do. You are far more qualified to evaluate an investment opportunity in a field that you are passionate about or have personal knowledge of than an industry that looks hot but in which you’ve never worked.
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Don’t let your expertise go stale
While it may be easy to do your research one time around and then consider yourself an expert, you need to continue to stay in the loop because market trends do go up and down, swapping out when ‘the next big thing’ comes along. Beware of these cycles.
These days staying up to date doesn’t need to take up all your time – have a good few sources to check on a daily basis and stick to it. No one person can follow everything, so pick a niche and keep up with that – let curated content do the rest.
Here are a few sources to kickstart your research: