Questions To Ask Before You Invest In A Company
As a professional athlete, you are in a unique situation because of your status as a fairly young individual with a good base of capital. For this reason, it’s why anyone and everyone will reach out to you to invest in their business ideas. As athletes get more and more involved in investing, it’s important that athletes are prepared, ask the right questions, and learn how to read different pitch decks. Professional athletes have long been criticized for not doing enough due diligence when jumping into the next start up or real estate play or friend’s business. Don’t be the fool in the family, friends, and fools round when investing in businesses.
It’s important to know what to look for and what questions to ask. With that being said, here are some questions that you should consider before investing in any start up. Before we dive in, it has to be said you should definitely have a team of advisors that look over any deal for you but it’s important to have a general idea of what’s going on consider you have final say in investing.
Who Are The Other Investors?
Knowing who else is investing in a particular deal can give you an indication on whether or not you should invest in it as well. If Bill Gates is investing in a deal and your cousin who dropped out of high school is investing in another deal, you should be leaning toward investing in the deal Bill Gates is in. That’s not to say his deal will end up paying dividends, it’s just increasing your probability of success. You have to remember investing is very risky so it’s all about increasing your probability. Knowing who the other investors are is one way to do that.
Who’s On The Team?
Knowing who is behind the deal can also help. Do they have a track record of being successful in this sector? Do they have a good report with various individuals within the space? Are they driven to succeed when adversity hits? Are you able to get along with them? All questions that should be seriously analyzed.
How much are you raising or how much funding are you looking for?
This will give you insight into what their plans are. Depending on the answer you will see how far along they are in the process and what their valuation is.
Does it Align With Your Criteria?
Does the investment fit within your investment guidelines? How will it affect your strategy? Is it in line with what you and your team have discussed? Is the investment worth it? By simply having a criteria, you will save a lot of time on picking which investments are worth your time.
Who's The Competition?
You have to know who you are dealing with and who’s the competition? Of course any business or start up or deal has the potential to blow up. However, it’s vital you know who is the competition in order to gauge whether investing is worth your time.
Do I Understand The Idea?
If you can’t properly explain the idea or project of what you are investing in, that’s probably a hint for you to take a step back. It’s important to have a clear understanding and not invest because something sounds good or because you have a “hunch”. Know what you are investing in.
Does my management agree?
You should be able to get the stamp of approval from your management team to jump into a deal. If you have a good team that you can trust, you will send them the deals that come your way for them to analyze and ask the hard hitting questions that you are paying them for. If your management team suggests you should pass on a particular opportunity, it’s probably best that you do.