How to invest in Fin-tech Startups

December 7, 2015

 

1) Make sure you have a diverse portfolio and you invest in a range of assets

Remeber, different assets are good investments in different times. It’s better to have a well balanced portfolio.”

2) Invest only 10% -15% of your investment money in tech startups

Though, tech startups are risky, you can get an 25% return on investment per year, as long as you invest prudently and follow certain rules.”

3) Spread that 10% - 15% across a variety of tech startups. Ideally: 15 tech startups over 5 years

In Europe “Fintech is the fastest growing startup sector . There is a really good chance to make a very big return on it. Fintech startups, like TransferWise and Funding Circle – are already $1 billion companies and there are many more on the way.”

4) Keep an eye on other angels

“If you come to something like Nordic Angels, you find specific fintech lead investors who have invested in fintech before. A lead angel is the experienced investor who does the first due diligence of the startup. He will also set the terms of the deal. Investing alongside them will minimize risk”.

5) Ensure you are investing in a growing market

“Markets such as: payments, transfers and insurance are always large opportunities because they are universally used services. Financial industry professionals are well placed to spot the winners  because they deeply understand their own sector and can really see what’s on the way up and what’s on the way down. They are starting with an immediate advantage.”

6) Make multiple  smaller investments

“An average angel investment is Nok 250,000. Individual investors occasionally invest up to a Nok10M but this should only be done as part of a varied portfolio.”

7) Get the Timing right

“Timing is the third core element of the startups’ success. Often startups have failed, since they started to do something too early or too late.”

8) Identify a team that you trust

“Approximately 70% of startup’s success is based on the quality of the team. The idea is less important. You are looking for people who’ve been there, done it before, understand the market, have strong entrepreneurial qualities and can drive through the early stages. Avoid single member founding teams and  look for balanced teams with the agility to learn and adapt.”

9) Ensure a robust business-model

“There must be a clear business model and are the founders should be testing it in a rigorous way. They are early stage and they won’t have all the answers, but they need to experiment and test, which also means – they need to find enough users who are paying and test the business model with them. It's experimenting as you go which is the agile way of starting up. It can also be viewed as experiment in high growth. Many will view it as too risky to invest in a startups with no customers at the idea stage.”

10) Fin-tech give you the ability to Hedge your bets

“By investing in fintech, Either way you are a winner: you either pick the next billion dollar companies and own a share of their success, or if they fail, you can still be ensured that your industry is safe and you have go the experience to take on to another startup that is in your portfolio

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