In this era of multibillion-dollar valuations and headline-grabbing acquisitions, it’s hard to blame investors for shifting more attention — and money — to start-up ventures.
But do they really know what they’re doing? Not always.
The Kauffman Foundation, an entrepreneurship research and advocacy organization, on Tuesday launched a new online education tool designed to teach prospective and current investors the fundamental ins and outs of taking equity in early-stage companies. In addition, the tutorials are intended to help entrepreneurs prepare for the experience of working with individual backers.
“Financing startups is very risky business,” Troy Knauss, executive director of the Angel Resource Institute, which was founded by the Kauffman Foundation and helped produce the online course, said in a statement. “Clarifying the approaches that have created winning ventures helps both groups prosper.”
Called InvestorIQ, the free online curriculum, presented via a series of short video lectures, is meant to help would-be investors decide, for instance, whether they should invest in start-ups, how much capital to set aside and how to find potential investment deals. In the final tutorial, an instructor discusses how capital will likely be used and the scenarios in which investors can expect to see a return.
Of course, as Knauss explains, those scenarios are hardly guaranteed.
In an introductory video on the site, he notes that individuals have likely seen “countless examples of individuals who have had great returns by investing early in promising new ventures.” However, he reminds viewers that “the vast majority of start-ups go out of business, leaving a lot of investors high and dry.”
“The truth for many [investors] is somewhere between great returns and total loss,” Knauss added, noting that his team helped design the course to “reflect everything we’ve learned from watching thousands of angel investors succeed and fail over the last 15 years.”
Kauffman Foundation officials also worked with the Angel Capital Association, an industry group comprised of many of the country’s largest start-up investor groups, to produce InvestorIQ. ACA and the Angel Resource Institute were both born out of initiatives started several years ago by the Kauffman Foundation.
Already a savvy investor, and thus, no need for a class? Are you sure?
InvestorIQ’s architects also added a short online quiz to help would-be and active investors test whether they truly know the fundamentals of backing young companies.