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3 Lessons Learned from My First Startup Investment

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3 Lessons Learned from My First Startup Investment

In 2011, I made a major investment in a startup company for the first time ever. The company is called Help Scout—they make web-based help desk software that makes customer service a breeze for any business.

Ever since I invested, countless people have come to me with questions about startup investing. They think it’s simple—you find a great idea and throw money at it until there’s a huge IPO that makes you filthy rich. Right? Isn’t that how it works?

Nothing could be further from the truth. If you want to invest in a startup, here are the three key bits of information you need to know:

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1. You’re not actually investing in a startup.

You’re investing in people. When the time came for Help Scout to start seeking angel investors, the three guys behind it were so cool that they wouldn’t even ask me to invest. Why? Because I’d actually been investing in them since they were in college.

Prior to forming their own company, they had all worked with me as interns, and then as professionals when they branched out and created a web design firm. Over this period, I took an active interest in their growth as entrepreneurs and young men. By the time they were ready to launch the company, they thought I’d already done my part.

When I finally heard they were looking for investors, I asked to see the presentation they were showing to potential candidates out of curiosity. I read it and was sold. “Can I invest in this?” I asked them.

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“Robert,” they said, “this is very risky. There’s absolutely no guarantee you’ll see your money again.”

“Listen, I’m not investing in the business. In fact, I’m still not sure I even understand what you’re doing!” I explained. “But I believe in you guys. I always have. And I’ll believe in you forever.”

With that, they had another investor.

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2. The startup’s concept doesn’t have to make sense to you.

To this day, I do not fully understand Help Scout. I just don’t have a techy brain, and I’m aware that ideas in that field don’t always make sense to me. But I also never thought a hot dog on a stick would sell so well.

The point is to not get so wrapped up in an idea that you think is amazing, because amazing ideas don’t execute themselves. Even amazing ideas will fail unless you have a team of extraordinary individuals putting in 15-hour days week in and week out.

The first time I attended a TechStars event (which is the startup accelerator that gave Help Scout its start), just about every company that did their pitch wowed me. By the end of the day, I was ready to write checks to ALL of them.

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“What’d you think of this one, and what about that one! Weren’t those ideas amazing?” I said to some of the more experienced investors. I was stunned when, immediately, they dismissed them. “Those people will never be able to pull it off,” they said. Don’t focus on the extraordinary ideas. Focus on the extraordinary people, even when you don’t fully grasp what they’re pitching.

3. Don’t do it if you need the money.

This is one of the first things TechStars will tell potential investors. If you are investing your last $10,000, they do NOT want your money. If you are investing with the hope that you’re going to get a huge payday, go elsewhere.

I didn’t invest in Help Scout to make money. In my mind, that’s nothing but a bonus if it happens one day. I’m investing in the guys. When I wrote the check, the money, as far as I was concerned, became gone forever.

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If you’re not comfortable with never receiving a dime in return, investing in a startup is not for you. Period.

If you’re interested in investing in a startup, the main thing to learn is to find the best group of innovators and hard workers that you possibly can. Look beyond the idea and assess the people who are going to be putting in the hours. Look for people who, more than anything, you want to see succeed beyond their wildest dreams. Don’t invest in the company. Invest in the hearts and minds of those behind it.

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Last Updated on July 20, 2021

Financial Freedom is Not a Fantasy: 9 Secrets to Get You There

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Financial Freedom is Not a Fantasy: 9 Secrets to Get You There

Have you ever considered your life now, and how it would be if you had more time to spend with your family and less worries about money?

Nowadays, financial stress is one of the most troublesome weights in life. If you’ve ever encountered financial stress, you know the difficulty of not having enough income to pay your obligations or bills.

Many people say that money is not the ultimate goal of life. While that’s true, money certainly plays a very significant role. The meaning of financial freedom changes with the different phases of our life, but ultimately, it is something that many people strive for.

In this article, we’ll explain how to capture that financial freedom you’ve been looking for. Read on to learn the secrets to financial freedom.

Break Free of Your Finances

Financial freedom is about having a constant flow of cash from your assets to cover all your regular needs.

When you are not worried about your income, or living paycheck to paycheck, you gain a great sense of freedom. It’s the freedom to be obtain and do what you truly need to make your way through everyday life.

Gaining financial freedom, though, is a process of growth, making small improvements and gaining emotional strength.

Though it seems hard to believe, it is really very simple to get financial freedom.

To do so, you simply need to make sure that your assets exceed your liabilities. In other words, you’ll need to find the sweet-spot where your residuals meet or surpass your expenses. This is something that you can achieve with the proper plan.

While not every person will accomplish financial freedom, the potential for anyone to do so is certainly there. Anyone can achieve this success, regardless of their income level.

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Outlined below are 9 secrets that will help you in your goals of achieving financial freedom.

1. Stop Unnecessary Spending

We often spend money inwardly, instead of objectively.

For example, you may spend when you’re anxious, depressed, restless, exhausted, from fear of missing out, or to please others. This is a very unhealthy way to handle your finances.

To stop this habitual spending, log down all your spending over the course of a month.

Just as some people keep a food diary, keep an expense diary. Remember not to just write down how much and what you spent the money on, also include the circumstances of why you spent the money. Was it an impulse buy at the checkout line or was it something you planned to purchase?

This increased self-awareness could enable you to avoid triggering situations in the future when you are considering an impulse buy.

2. Plan a Monthly Budget

This is a great opportunity to get serious.

Take a seat with your spouse or partner and make a monthly budget based on your income, not your expenses. You are never again going to spend more cash then you have on hand.

Overspending is the thing that led you to more financial obligations. Make sure you decide every month what is coming in and what will be going out and stick to that budget… no matter what.

3. Cut-up Credit Cards

Perhaps you are the type of person who always pays your credit card balance in full before the end of your billing cycle, and enjoys the reward points you gain. If this is the case, then you’re already way ahead of the game.

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If not, you may want to consider ridding your life of the burden that credit cards bring.

Many cards have strategies set up so that if you make a certain number of late payments, they will raise your interest rate much higher. This can really add up in the long run and you won’t be doing your financial situation any favors. If you’re prone to late payments or have a large balance due on your cards, cut them up!

Without proper self control on credit card spending and payments, you are basically throwing your money away. To ensure that you have better control over your spending, use only cash or debit for all future purchases (and don’t forget to pay at least your minimum payment on your cut-up cards each month!).

4. Increase Savings

There is no doubt that for a comfortable retirement you must accumulate satisfactory savings throughout your working life.

It’s good practice to save up to 15% of your income.

Start with your workplace 401(k), if you have one. If not, a Roth IRA (if you are eligible) or a traditional IRA (if you are not eligible for the Roth) are the next logical steps.

Increase in longevity means you might be able to look forward to 25 to 30 years in retirement, or possibly even significantly more. Investing now in good retirement plans will ensure that you have a guaranteed a stable monthly income when the time comes to stop working. [1]

5. Invest Wisely

Consider investing in funds.

Specifically, you will gain higher returns if you invest in different types of mutual funds such as Debt funds, Equity funds and Hybrid funds with a proper balance, although it absolutely relies on your personal preferences and sense of risk taking.

To get the most of these benefits, make sure you are investing in a variety of assets. Another resource of investing in mutual funds is SIP (Systematic Investment Plan) where you invest some money every month in funds. SIP works by averaging the per unit price of the stock.

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Mutual fund investors are aware of the benefits of an SIP (Systematic Investment Plan). For one, it is the most secure way to invest in equity mutual plans so that wealth is created over a long period of time. This plan also helps you to gain a better sense of financial discipline, which will come in handy in all your financial endeavors.

6. Invest in Gold

There isn’t really a better way to invest in gold than to have the physical gold itself in your possession.

You can purchase gold coins and bars from mints as well as from coin dealers and other private sellers.

Another way to invest in gold is through ETFs (Exchange Traded Funds).

These are is similar to mutual funds but they are exclusively investments of gold. ETFs are great because they offer more liquidity; the ETF owns the actual physical gold, stores it, and retains the value of the shares. These shares can then be bought and sold in the stock market, and one big benefit is that the transaction costs of gold ETFs are much lower than the that of physical gold.

With its consistently-increasing demand, investment in gold can be very wise long-term investment to make.

7. Stash Emergency Funds

Whether it’s a cash gift or a work bonus, always try to save any extra money that comes your way rather than making unneeded purchases.

If you get paid every other week, you’ll get an “extra” paycheck (three rather than the usual two) twice a year. Either save those paychecks towards your emergency funds or utilize the money to pay down other obligations, such as loans, credit cards or other debts.

Make it hard to get your cash.

Put your savings in an alternate bank, maybe an online bank that forces you to delay for several business days before transferred money hits your regular bank account.

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8. Find Fabulous Mentors

Find a mentor, such as a friend or family member, who has exceptional control over their finances and pay attention to everything they do.

If you do not have any friends or family that are enjoying financial freedom, then find a mentor online! There are numerous blogs and guru websites featuring the advice of many people who have reached financial freedom, and they exist primarily to let you in on how to achieve it for yourself.

There are also plentiful forums available that share tips and tricks on how to best achieve financial freedom. Read as much as you can and start changing your habits for the better.

9. Be Extra Patient

Patience is the key of financial success.

Being patient can be quite tough, especially when you’re struggling with your finances, but having faith is worth it. You’ll continuously be on the right track if you are taking the proper steps above.

So don’t be discouraged, even if you are only saving a few dollars a month; it all adds up. Within just a few years you’ll look back proudly at your accomplishments and be glad that you had the patience to get there.

Financial Freedom for All

Anyone can achieve financial freedom, regardless of their financial circumstance.

Use the tips provided above to get yourself on the track to financial freedom and toss your monetary concerns out the window. If you wish to achieve a life with financial freedom for yourself and your family then you must adopt a disciplined approach towards your finances.

Following the simple secrets above is a great start to making your money work for you, so you can work less and live more!

Featured photo credit: rawpixel via unsplash.com

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Reference

[1] Hartford Gold Group: IRA Retirement Accounts

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