For Clients Who Want To Get In On The Technology Sector, Here Are Four Ways To Guard Against High Startup Risks

Friday, December 21, 2012 00:18
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For Clients Who Want To Get In On The Technology Sector, Here Are Four Ways To Guard Against High Startup Risks

Tags: investment strategies | stocks | technology

The technology sector has been a strong area of the market and your clients may be asking you how they can get in on technology startups.
 
When new companies are going sky high, it’s easy for investors to forget about the risks. Here are four rules you can educate them on to guide investment selections in tech companies.

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1. Help your clients understand that investments in early stage companies are really investments in the people running them.
 
Some startups fail because their founders are not open to the probability that their idea could either be flawed or made better with the input of others. So it’s best to make sure the egos at the top are balancing each other out appropriately.
 
2. Make sure the startup understands its market and knows what it’s doing. Every startup has three overall phases of development. First is in having  a product that people actually want.
 
Second is tailoring the product and bringing it to market.
 
Third is scalability of production. How do you get the product to market in a way that meets your profit goals. Many startups think everything has to happen at once.
 
They don’t understand that the first stage is for learning, the second for specifying the product to meet customer demands, the third stage is about growing the business and creating scalability as you go.
 
3. Then the company needs to understand the scope of its offerings. Does the company understand its vision and what it’s trying to create?
 
4. Is this a team that has succeeded in the past? Are they well-connected within their industry and within the sector they are in?
 
Is there more than one founder or is the company entirely dependent upon a single person? If there are multiple founders, they most likely have already learned how to deal with conflict and to work through problems and issues together.
 

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