If you’re thinking of investing in a startup, there are a few important things to consider, writes Bill Clark for Mashable. For the most part, the SEC restricts investing in private deals to mostly accredited investors, meaning people who either have a net worth of $1 million (excluding a primary residence), an income of $200,00 per year for the last two years, or $300,000 in household income per year for the last two years. Clark’s advice:
1. Make sure you have fast access to your money in case you find a great startup. You might miss an opportunity if you need to wait to liquidate a CD or get money out of an IRA.
2. Understand that the majority of startups fail.
3. Spread your risk by investing in more than one startup.
4. Realize it could take five or more years to get your investment back.
5. Know the exit strategy. Is the plan to go public at some point? Is there a good chance competitors want to acquire the business?
6. Be a mentor. A big part of angel investing is helping the business succeed.
Read more at Mashable.