How to choose an investment viable startup?

With equity crowdfunding becoming available to unaccredited investors, many have turned their attention towards this business. And the first challenge most novice investors face — how exactly to do you find that wonderful investment, that “second Facebook” that’s going to make you rich? Well, we’re here to give a few hints and help answer those initial questions, considering that most unaccredited investors likely don’t have enough funds to order a full-scale project research and thus will have to conduct one themselves.

Product viability

This step is pretty self-explanatory, yet complicated. How real is the product? Is it possible to complete the project with stated amount of money? Is there demand for such product? What pressing problems does it solve (if any)? Most investors realise those are vital questions, though arguably very few possess the knowledge necessary to answer them. Because of that it becomes really easy for entrepreneurs to trick potential investors and create a falsely positive image of their startup. To avoid this, one should either invest in industries he knows well, or be ready to spend enough time conducting due dilligence of the whole project.

Financial viability

This is the most controversial part of startup valuation. On one hand, everybody understand that a startup, especially in a fund-raising stage, can hardly be expected to have solid financial figures. On the other hand, no investor would like to give his money to an immature company without effective money management and investment protection. So, in our opinion a happy medium in such situation is to not be too picky about startup’s actual financials, but rather be strict in evaluating crowdfunding platforms it’s working with, to be sure what kinds of guarantees and protection for investors it provides, terms of use, specific services, etc. That’s where it’s possible to figure out possible dangers and avoid them by either choosing a less risky startup or a platform that better suits your risk allowance.

Team viability

Even the most demanded and ground-breaking project is worthless without a team of specialists able to make it true. That’s why it’s important to evaluate people involved in the startup. What’s their experience and education? How long has this team been working together? What are the guarantees it will not fall apart half-seas over? Do they have every kind of specialists needed to complete the project? This step is quite tricky, since an average investor is unable to meet with the team personally. So, the only real option he has is to check previous accomplishments of the company and any public information about its employees available.

Industry viability

Last but not least is a more general topic. Unfortunately, startup can simply appear in a right place in a wrong time. What we mean by this is that sometimes global market and industrial environment can be unsuitable for a project. There can be different reasons for this: crisis in the industry, economic decline, market oversaturation, changes in legislation, etc. The problem with this part of startup valuation is that sometimes entrepreneurs themselves can be blinded by how incredible their ideas and projects are and be unaware of a more global picture. So this step rests completely on investors’ shoulders. It’s not that common for a current situation in the industry to affect the startup, however when it does, consequences can turn up to be quite devastating.


So, to sum everything up, here’s what makes a startup worth investing in: a solid idea of a project that solves some real problems; sufficient level of financial stability granted mostly by the right pick of crowdfunding platform; team of specialists competent enough to be able to actually embody the idea; and overall macroeconomic situation and lack of industrial factors able to affect the project in a major way. With these points in mind your chances to find a startup that will be able to multiply your investment tens or even hundreds times will drastically increase.