The improving economy and technology in the region mean startup investing is on the rise. Though there is a lot of information regarding investment management, there is a lack of it specifically pertaining to startups.

This is due to a multitude of reasons, which often make it tough to value a company, predict the best way to exit and judge your ROI in advance.

We thought we’d remedy that with this list.

Investors can’t invest in any company they want.

Unlike the public companies, startups aren’t always accepting money. Investors have to find a company that is actively raising funds and then try to get into that deal.

Here are the top VCs in Southeast Asia

Your investment worth is often not known

In the private markets like startup investments, price discovery only happens when a company raises another round or is acquired. This can mean it is a bit difficult to gauge your investment worth as a company grows.


Advice isn’t freely available

Most financial services firms shy don’t give guidance on startup investment, because there isn’t enough information available to make trusted recommendations. This creates a gap in advice. As investors increasingly turn to startups, this means that they are left to make their own evaluation models.

Getting into deals are guaranteed

The paradox is that the best company can likely raise money from whomever they want, leaving the lesser known investors to the perceivably less valuable deals.

You rarely have access to the full inner workings of a company

If you’re not a majority investor, which is unlikely that you would be, you may not have access to the inner workings of the startup you invested in. This reduces your ability to assist and also impacts your ability to judge how successful the company is becoming.

The percentage you purchase isn’t the percentage you end up with

It’s wise to negotiate pro-rata rights, which will allow you the right to buy more shares in subsequent rounds in order to maintain your ownership percentage.

It really is nothing like Shark Tank

While we love Shark Tank, we have to remember it is a reality TV show, so it isn’t always that easy. Deals sometimes may take weeks or months to close. With top startups, they often control the price and angel investors may not have enough influence to change it.

Here’s what entrepreneurs can learn from Shark Tank

Diversification is expensive in startup investment

There isn’t that much room for diversification in startup investments. The amounts needed to be considered a serious investor make diversification of their portfolio considerably more challenging than buying into a publicly traded fund.

Diversification is less effective

Startup deals are riskier due to lack of market information, so diversification may not even reduce your risk considerably.

Making money isn’t everything

Often, investing with the intention of exit without adding value, can be detrimental to your investment. Therefore it is better to invest in something you have a bit of passion for and a clear ability to add value beyond just the money.