With the rise of technology startups and innovation hubs, there are more opportunities than ever for everyday investors to put money into promising young companies in their local area. However, finding those startups and evaluating their potential can be a challenge without the expertise or connections of venture capitalists. This article will provide tips on how to locate startups to invest in near you, what to look for when assessing startups, and how to approach investing in local startups as an individual investor.
Check local startup accelerators and incubators to find investable companies
Many cities and regions now have startup accelerators, incubators, and innovation hubs that provide education, mentoring, facilities and sometimes funding to promising young startups. Getting connected to the local startup ecosystem through these organizations is a good way to get exposure to investable companies in your area. For example, Y Combinator and TechStars operate accelerator programs in various locations that have helped launch companies like Airbnb, Doordash and ClassPass. Co-working spaces, university entrepreneurship centers and industry-specific incubators are other places you may find startups looking for early funding.
Attend local pitch events and demo days to meet founders
Organizations like the ones mentioned above frequently hold pitch events, demo days and startup mixers where you can meet founders and learn about their companies. Local angel investing groups and Meetup.com groups focused on startups and entrepreneurship also organize similar events. These are prime opportunities to ask questions directly and gauge whether you’d be interested in investing.
Research angel and venture capital funding databases
There are some useful databases that track early stage startup investments, which can help you identify companies that may be raising additional rounds. AngelList, Crunchbase, and Pitchbook all provide data on startup funding rounds. You can search and filter for location and other criteria. Using these sites, you may find interesting startups in your city that have already received some external validation through angel or VC funding.
Leverage your own network and connections
Don’t underestimate asking around your own personal and professional connections if they know of any promising startups raising funds. You never know who might have a lead on an interesting startup opportunity through their own network. It’s ideal if you have any contacts in the local tech or startup community who can give you insights or referrals. Coworkers, friends in business school, startup founders in your network – all are potential sources of startup investment prospects.
Assess startups carefully if you do invest
While exciting early stage startups may seem highly investable, make sure you still do your diligence assessing the founders, business model, market potential and risk factors. Founder experience and drive, product-market fit and traction, financial performance and metrics, competitive differentiation and IP protection, and reasonable valuation expectations given the stage of the business are all things individual investors should review.
In summary, tapping into local startup ecosystems by engaging with accelerators, attending pitch events, leveraging funding databases, and utilizing your own network are effective ways individual investors can source promising startups to invest in near them. But be sure to evaluate those startups carefully on key criteria before making any investment decisions.