Startups understand that you’re playing an integral role in the startup ecosystem in Bahrain and in the Gulf region. Your money is crucial for funding the growth of startups and the development of innovative ideas.
Speaking to startups help us understand a couple of things that they want to bring to your attention and to keep in mind when thinking about investing in startups.
We asked Amjad Puliyali, founder of the Bahraini startup and online grocery delivery platform GetBaqala, if there’s a rulebook or list of no-no’s when meeting with investors and it turns out that there is.
As an investor, it’s important to realize some aspects of investing in startups go against traditional real estate investments. You’ve probably encountered and realized these aspects first-hand, but here goes. Contrary to popular belief…
- You don’t need a high valuation in the beginning: Investors want to determine if your startup has a high valuation. Numbers can give you good insights about traction, but they alone aren’t a great measure of how the startup is doing. Go beyond the numbers as the numbers will come later. Look at potential instead. Some of the best investments in startups were looked at from the standpoint of potential rather than profits or valuations at the beginning. With potential comes a good valuation and with that, the profits.
- Startups are risky investments. Traditional real estate investments are relatively predictable, but startups aren’t. Startups won’t guarantee 100%, initial capital can be lost or it can be multiplied tenfold and sometimes even much more. You may not see a return for years. Basically, don’t expect the startup to achieve unicorn status overnight or anytime soon. It’s going to take some time before any of those profits come. A startup needs all the cash it can get and any return might not be for three to five years. Or, there might be losses even while the company is making profits. According to a Bloomberg article, Uber lost at least $1.2 Billion in the first half of 2016 and for a long time was not making a profit. You know what they say though, high risk, high reward!
- Startups are experiments. Bahraini startups want you to look at where the company is heading. As a startup, you have people with a vision and want an investor that shares that vision. Startups spend time exploring real problems and finding solutions, which require experimentation as to what may or may not work.
- Investors need startups. In mature ecosystems, there’s a feeling that investors need the startups more than the startups need the investors. That’s because they realize the potential a startup can bring, multiplying an investment ten or hundred fold potentially. Be approachable, friendly, and helpful. If you can’t assist the startup directly or invest, be sure to point in the right direction, dividends on that help can pay off over time.
- Get to know the people as much as the startup. Spend some time getting to know the people more than the technicalities of the idea and startup. Yes, the latter is crucially important, but sometimes people matter more. Ideas can be made or broken because of the people working on it. Ideas can be worthless, but at the right time, place, and with the right mix of people (many times more than one), these ideas blow up.
This may seem like cliched advice but look beyond the surface with a startup. You may be surprised in the long-run on what the startup can achieve given the proper guidance and financial support.