Things To Consider Before Investing In Early Stage Companies

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When you are investing in a business of any size, industry or location there are always a lot of different things to consider before making an investment. At the moment there are a number of important factors to think about with the UK economy and keeping on top of the latest news and information is essential for any shrewd investor. Here we will look at some of the important things to consider when investing in early-stage companies.

 

Consider the Challenges the Company Is Facing

There have been several challenges that any Company has had to face over the last few years and there will always be more. Whether a business is facing rising costs, supply chain issues or logistics problems you need to be confident that they can rise to and overcome any challenge that faces them. Not only that, it is worth researching and understanding contingency plans the Company has should something go wrong that could affect the business. With rising costs affecting almost all businesses, you should be confident that the Company can reduce costs and not compromise its products.

 

Look At the Competition

It is unusual for a new business or product not to face any competition. If you are investing in an innovative new product which claims to have no competitors there are two things you should consider. First is to research the market to satisfy yourself that there are no similar products, or the business that you are considering investing in has a clear unique selling point (USP). The second is to see what plans are in place to prevent other people from making a similar product once it is launched. When asking business owners about their business plan this should be one of the key areas to focus on.

 

Consider Alternative Investments

Alternative investments to consider could be Enterprise Investment Schemes (EIS). EIS was introduced by the government to encourage investment in UK businesses. Tax relief options are one of the benefits given in exchange for investment in these higher risk early stage companies. . There are some strong business sectors in EIS, notably tech and AI. If EIS schemes are something you would like to consider you should take a look at an investment team which has years of experience and expertise. An example of an investment team that works with start-ups as part of the EIS is Oxford Capital and will be able to advise on EIS opportunities.

 

What Will The Impact On Your Portfolio Be?

It can be easy to always invest in the areas you know best and feel most comfortable in. However, it is worth remembering that these might not always be the best place to invest in, depending on market fluctuations. This is where alternative investments come in as they are one of the best ways to diversify your portfolio. Alternative investments can help avoid some of the risks associated with traditional investments. By spreading your investments across different areas your portfolio will be more diverse and when one area isn't performing as well as you would like, the other investments should balance it out.

 

Reflect On the Environmental Impact

Climate change is an important issue that all of us are facing right now. Consumers are changing their shopping habits and want to know that what they are buying has as small a carbon footprint as possible. Asking the right questions about sustainability in a business model means you can consider the environmental impact of the business before investing. A business with good sustainability practices will be more future-proof than a business that hasn't considered its carbon footprint.

 

In Conclusion

Although there are lots of challenges facing all businesses right now it is essential that any company you invest in not only has a great product or service but also has the ability and drive to thrive. With soaring costs, fuel price fluctuations, rent increases and changes in consumer behaviour you need to be sure that the next promising business can rise to these challenges. There are incredible start-up businesses out there and they need investment to grow. Armed with the right questions, help and expertise you can help them to succeed.

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