First, think carefully and ensure that the business you want to join aligns well with your ethical and moral principles. Some months ago, we had the opportunity to invest in a business that was quite profitable and technically sound. However, in on the first shareholder meetings we were asked to vote against a quite sensitive environmental issue. This was going against our vision of a better world, and we ended and in a very awkward situation. As a result, we ended selling our participation in the company and we lost money. So, before this happens to you, ensure that the mission and vision of this business idea or start-up, is congruent with your lifestyle and culture.

Once you find companies that are aligned with your personal ethos, think carefully what the current stage of the start-up is. Is it just an idea? Is there a clarity in the business model? Is there a market for this product or service? All these questions are key to understand what is the risk level of your investment. Recall that the higher the risk you take the higher the expected return of your investment. In finance, one of the ways to measure risk is with standard deviation. We refer to the standard deviation of a return as its volatility (Berk & DeMarzo, 2017). Normally, there is more risk if the start-up is only an idea. The reason is that there is a long way between an idea and its materialisation, many things can happen that can derail the project and end in a total failure. However, you could be handsomely rewarded for your investment if this idea achieves a successful implementation.

As Ash Maurya says in his book Running Lean: “Life’s too short to build something nobody wants”. So, before you invest your time and effort, ensure there is a market fit for the product or service. Try to ask questions to your potential partner about how big is the market and what is the feasibility to capture a portion of it. It Doesn’t matter how innovative is a product, if it doesn’t have a market fit, it will fail.

The final question you must ask yourself and your potential partner, is about the feasibility to produce the product or to offer the service. This could be obvious, but in the reality a lot of companies fail because they are not able to achieve in the reality what they have in the paper. Sometimes the technology doesn’t exist to support the development of an idea or simply to produce is that expensive that no one is willing to pay a price for it. Some years ago, there was a famous company in Silicon Valley developing a device to complete blood analyses. The product was quite innovative, and the promise made this company to achieve a valuation of several billions. Unfortunately, the were not able to produce what they were promising and the ended in a total collapse. To avoid this awkward situation always ask yourself and your potential partners these questions: Can we really produce this? Can we really offer this service?