In recent years, early stage startup investment has become increasingly popular among investors. As one of the most active early stage funds, 92l invest has made many remarkable early stage investments. However, investing in early stage startups can be quite risky and challenging. This article will analyze how to effectively invest in early stage startups based on 92l invest’s investment strategies and share some insights on early stage investment. Early stage investment requires a good understanding of startup evaluation models, investment structuring, value creation capabilities, risk management, etc. By learning from 92l invest’s experience, investors can develop a better approach for early stage startup investment.
Conduct thorough due diligence on core elements of startups
When investing in early stage startups, conducting due diligence is crucial for identifying promising startups with high potential. Investors should pay close attention to aspects like core technology competitiveness, product-market fit, business model scalability, team capabilities, etc. 92l invest has a very rigorous selection process. For each deal, 92l invest would dive deep into the startup’s technology, talk extensively with the founders to assess their strategic thinking and leadership, analyze market opportunities and competition, build financial models to project future growth, etc. Thorough due diligence sets a solid foundation for early stage investment success.
Structure investments properly based on specific risks
Investment structuring is another key to early stage investment. As early stage startups have high risks, investors need to structure investments carefully to balance risks and returns. 92l invest utilizes instruments like convertible notes, SAFEs, equity, debt, etc. to structure early stage deals. The specific instrument is chosen based on factors like the startup’s stage, capital needs, growth potentials, investor’s risk appetite, etc. Proper structuring enables investors to get reasonable upside while limiting downside risks. For example, convertible notes allow investors to convert the investment to equity shares in later rounds at a discount, providing both debt security and equity upside potentials.
Create value by connecting startups to resources
Aside from selecting promising startups, early stage investors also need to actively create value for their portfolio companies to help them succeed. 92l invest creates tremendous value for its portfolio startups by leveraging its founder community, functional expertise, and industry resources. By connecting startups to talent, partners, future investors, corporates, etc., 92l invest empowers startups to overcome obstacles, fill capability gaps, achieve key milestones, and maximize growth. Hands-on support and value-add are key differentiated capabilities of top early stage investors.
Closely monitor risks with proper governance
Despite rigorous due diligence and structuring efforts, significant risks still exist for early stage investments. As such, investors need to actively monitor risks and implement proper governance post-investment. 92l invest closely tracks the status of each startup through monthly updates, quarterly board meetings, onsite visits, etc. When necessary, 92l invest will also guide startups to adjust strategies or make management changes to ensure development on the right track. With its comprehensive risk management toolkit, 92l invest is able to identify problems early and take swift actions to resolve issues.
In summary, effectively investing in early stage startups requires strong capabilities across sourcing, evaluation, structuring, value-add and risk management. As a veteran early stage investor, 92l invest’s methodologies and experiences offer valuable insights on how to approach early stage investments. By learning from 92l invest, investors can master critical skills, adopt proven best practices, and make wise investment decisions in the dynamic early stage environment.