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Fundamentals crucial in start-up investing

Individuals looking to invest in organisations that are in start-up phase must look at traditional company fundamentals to assess whether these entities will perform well and provide a good opportunity to enjoy solid returns, a financial commentator has said.

“[These fundamentals] are all about can you get customers, will the customers pay for it, are you solving a problem and can the founders cope with the growth and managing staff or are they just geeks with a good idea that just can’t have a relationship with anyone,” Sunrise host and financial journalist David Koch told delegates at the Your Money and Your Life Expo in Sydney recently.

During his presentation, Koch admitted he had achieved mixed results with investing in companies involved in innovation, but his experience had allowed him to recognise the characteristics individuals should gravitate toward to make prudent investment decisions.

“The two I did terribly on were great ideas, but they had founders who were terrible and they were very early stage,” he revealed.

“They had a great idea, both of them, but they had founders that couldn’t cope with the growth of the business.

“The ones I did better on were second round investing series and the start-up had generated some revenue, built a customer base and had been through an accelerator.”

Further to this point, he said start-up entities involved in communities such as Stone and Chalk were more likely to have resolved any initial problems they may have had that would impinge on the business proposition.

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