In the modern world, the technology industry is shifting all the time. While most of the news is focused on the goings-on at big-name companies like Apple, Google, and Facebook, there is plenty of less-public activity going on behind the scenes. Tech activities that are worth investing in, that is.
Computers are almost as clever as humans these days, and fields as diverse as agriculture and motoring are changing because of technological innovations.
A look at sites like AngelList reveals lots of investment opportunities, and investors who are desperate to find the next big thing are often hunting down leads at tech networking events. For many investors, the fast-moving world of tech is ideal because it throws up lots of opportunities to get involved in exciting – and potentially very lucrative – technology.
This industry can be hazardous and risky, however, which is why it is important to get some external advice before making any investment decisions.
In this article, we will explore why many investors are flocking to the burgeoning tech industry, the hazards involved, and how to get the right advice to ensure that your investment is as safe as possible.
[pullquote]Whatever the risks, there is no doubting that investing in tech can be very appealing.[/pullquote] Tech innovations like cool cameras, social media sites, and search engines are often associated with cutting-edge innovations and a real sense of glamour, so it’s not surprising that investors want to get involved.
When it comes to tech, there is also the potential for returns that are much higher than investments in other industries. For example, when Facebook made its initial public offering in 2012, shares sold for around $38 each; they were hovering around $170 in August 2017. For those who get their investment decisions right, the returns can be very lucrative.
Furthermore, tech companies are often disrupters, which means they can build up success while the rest of the market is focused on a goal that is about to become obsolete.
Apple, for example, was originally a computer company, but it moved successfully into the field of smartphone design. This meant that brands like Blackberry lost sales, in part because they weren’t ready for the new developments Apple was about to bring.
While there are many reasons to invest in technology businesses, there are a few risks to keep in mind.
One of the major problems with many tech investments is that the companies you look to support are start-ups, and that means you might not get the information you’d normally use to make investment decisions.
[pullquote]Many start-ups are unable to disclose important information like profit and loss figures simply because they have not yet reached a stage where those metrics are relevant.[/pullquote]
There is also no guarantee that the market will accept the company’s product or service. You should always look for signs that the founders are trying to demonstrate this, such as market fit research or the development of a minimum viable product that has been extensively tested. There really is no guarantee that a tech start-up will succeed.
For that reason, you may find yourself edging toward using your gut instinct when making an investment decision. In the absence of better information, that’s okay, although a skilled mentor with years of investment experience behind them may be just what you need.
Finally, a big risk associated with tech start-ups is the simple passage of time. Could the product or service in which you invest simply become obsolete in a few years? In a world of constant research and fast development, could competitors invent a better version in just a few short years?
For example, if you invest in a shiny new type of camera, it could easily be superseded by one with more developed features within a shorter time frame than you think, so it’s worth getting advice from experts before making your decision.
Because of the risks involved in investing in tech, it is wise to get some advice from those who have experience. Depending on your background, senior managers at your company or previous workplaces may be happy to mentor you.
It’s also possible to pay for professional advice, which may be the most prudent option given the risks involved. For example, adviser David Kiger sits on the board of several companies and has decades of experience in the private sector, so he knows exactly which pitfalls new investors should avoid. Look for experts with this type of experience when choosing an adviser.
Don’t be afraid to ask for help. It may seem slightly embarrassing at first, but when it comes to risk management, it is certainly worth it in the long run. Remember that no man is an island!
The tech industry has plenty of appeal, and there is no reason that new investors should steer clear of it. As long as you acquire useful and relevant advice from someone with lots of experience, you stand a good chance of making a wise investment choice and maximizing your returns.
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