Sergey Kartashov (SergejsKartasovs), the chief executive officer of Ukrainian IT development company Generation Partners, talked about what to do to choose an ideal startup to invest in without getting lost into the ocean of IT startup projects. The number of new startups appearing on the market has increased viably along with the IT investments. The IT market has shown positive growth in 2020 by following the rule of “low profit – high investment”.
Sergey Kartashov (Sergejs Kartasovs), the chief executive officer of Ukrainian IT development company Generation Partners, talked about what to do to choose an ideal startup to invest in without getting lost into the ocean of IT startup projects. The number of new startups appearing on the market has increased viably along with the IT investments. The IT market has shown positive growth in 2020 by following the rule of “low profit – high investment”.
The IT market is full of examples when a low investment startup turned into a high-profit business after some time. For example, Rovio turned a 100,000 euros investment into 57 million euros through Angry Birds in just a few years. Similarly, Mike Markkula converted $92000 investment into more than $200 million through investment in Apple. Sergey Kartashov noted some important aspects of investing in a startup.
Predictions based on firm analysis
Every investor wants to get as much profit as possible through his investments. However, it does not happen all the time as every idea does not produce a meaningful return on investment. It is an art to determine which idea has the potential to give handsome returns. To predict the future of an organization with a higher probability of success, you must have to analyze a huge number of proposals. “When choosing a startup to invest in, it is necessary to assess a combination of factors, such as the host country, the age of the company, its income for the last year, whether there are other donors and who they are, and the total amount of their investments,” said Sergey Kartashov.
Importance of angel investments
Angel investment is a separate type of investment in a startup business. This type of investment is getting more and more popular in the modern business world. The business angels have converted many startups into large corporations. These investments deal with financing a project at the early stages when the risk factor is quite high. For example, Peter Thiel, an American entrepreneur, invested $500,000 in Facebook in 2004. His income rose to $1.5 billion in 2011 due to his shares in the largest social media platform. David Cheriton, a professor at Stanford University, invested $100,000 in Google in 1998. After a few years, he became a billionaire through receiving the return on his investment. The business angels invest in inspired startups apart from investing in art.
Low-risk factor
Sergey Kartashov, the CEO of Generation Partners LTD, talked about how to reduce risk while investing in a startup. The assessment of the management of a startup can reduce the risk. If you are going to invest more than $100,000 in a startup, then you should only consider finished products. “You should use various tools and formulas to evaluate the risk factors,” said Kartashov. He also advised the investors to analyze the strengths and weaknesses of a startup to predict its future accurately. By using firm analysis, you can get an idea about the development of a company. Moreover, an investor should diversify its investment portfolio to reduce the risk. The profit generated by productive projects can compensate for the results of the unproductive projects. The chances of getting success on an average project are quite low. So, diversification plays a crucial role in staying in business for a long time. The CEO added, “When it comes to financing startups that do not have yet a finished product, it is worth resorting to diversification.”
