I’m what you’d call a “sector agnostic” investor.
In other words, when deciding whether to invest in a startup, I don’t give too much weight to the sector it’s in.
I care more about growth, product, scalability and leadership.
If you’re reading this, you should probably be sector agnostic too.
As online startup investors, we don’t see enough deal volume to be overly picky about which industries we invest in.
Unlike venture capitalists, we can only invest in those companies that choose to use equity crowdfunding. And for now, that’s a relatively small piece of the pie.
However, this isn’t a bad thing.
Learning the Ropes
Today’s equity crowdfunding scene is a perfect learning environment for anyone intrigued by early-stage investing.
With the industry’s recent growth, there are around 30 to 40 live startup deals across various equity crowdfunding “portals” at any given time.
While that’s not enough volume to be picky about sector, it’s a great number for learning the ropes.
A range of 30 to 40 opportunities is enough to guarantee there will be attractive deals to be found, yet not so many that it’s overwhelming.
With minimum investments as low as $50, you couldn’t ask for a better way to learn about early-stage investments. And you may end up hitting a home run.
I’m not saying sector doesn’t matter at all. It does.
Startups in fast-growing sectors, like cannabis, can be extremely attractive and lucrative.
What I’m saying is this: Don’t get pulled into a deal just because it’s in a “hot” sector, like AI.
Try to look at each opportunity objectively. Ask yourself, “Would I invest in this team if it were in a different sector?”
“Is the company’s progress impressive compared to that of its competitors? What makes it special? How defensible is its business? Will it be able to attract top talent?”
Attention: New Investors
It’s particularly important to keep all this in mind if you’re a new startup investor.
Because when you start out, many deals will look like “can’t miss” opportunities (especially those in hot sectors).
You may have gotten lucky and spotted a gem in one of your first deals. But realistically, the chances of that happening are pretty small.
Dig deeply into the opportunity. Sleep on it. If you still feel strongly about the company, invest a small amount.
I’ve found that this is the only way to truly learn about an investment class. You want “skin in the game,” as author Nassim Taleb would say. It motivates your brain to pay attention.
Track your investments over time and see what’s working.
If you take it seriously, your knowledge about early-stage investing will grow by leaps and bounds. And you just might hit a home run in the process.
Founder, Early Investing
P.S. If you read all the way down here, you should probably join our research service First Stage Investor. We help members find the most attractive deals and have tons of educational material available. Watch our full presentation here.