RENEWABLE ENERGY START-UP BUSINESS INVESTING
If you want to invest in a renewable energy start-up business, be careful, be very careful.
The more you read about energy and alternative energy technologies, the more you find renewable energy start-up businesses with great sounding products. Some of these operations sound like they could be the next great investment like, say, Microsoft. In fact, when start-up founders speak, most of these new companies sound like they are, indeed, the next Microsoft.
It could be that one of them will do great and profound things, and make investors wealthy beyond their dreams. But the odds are over a thousand to one against that happening. What usually happens is that these great sounding companies die or disappear, and take investors money with them.
There are endless great sounding renewable energy start-up business deals.
Most of them lose money.
Still, even though you know that a huge amount of financial risk is involved, some deals just sound way too good to pass up. If you’re hit with an irresistible itch that you have to scratch with investment money, there are ways to increase your odds for success and limit your risk.
When you see a company that looks like it might be a good investment, it will probably fit into one of four categories.
THE PRIVATELY OWNED - WELL FINANCED COMPANY
A small renewable energy start-up business may be privately owned and well funded through personal funds and conventional banking institutions or similar means. It may not be seeking any kind of funding, so no investment opportunity currently exists.
THE PUBLICLY HELD COMPANY
The company may be publicly held. In that case the owners will be happy to provide you with the ticker or stock symbol and other information so you can either purchase stock through a brokerage or invest in a mutual fund that carries that stock.
If that is the case you may want to go to the
Conventional Energy Funds
Alternative Energy Funds
pages for a primer on this kind of investing.
THE COMPANY SEEKING LARGE AMOUNTS OF EXPANSION CAPITAL.
The company could be a renewable energy start-up business that’s seeking funding to greatly expand operations. They are probably seeking funds amounting to several million or even tens of millions. This is often done through venture capital funds.
Venture capital funds get their money from large capital sources such as individuals with several million dollars to invest, or investment banks. The opportunities for the small investor are limited, but if you find a company seeking venture capital funds, or a venture capital firm that interests you, then you should contact them directly.
They may refer you to an investment bank. The folks at the investment bank will give you investment information and the minimum sums they are willing to accept from investors.
This kind of investing is a high risk game, especially for the uninitiated. ALWAYS limit your investments to amounts you can afford to lose.
The following links are good places to start learning about alternative energy and venture capital investing:
National Venture Capital Association
website is a great reference that offers up-to-date information on a number of aspects of venture capital fund operations including past performance of VC funds and other areas of interest.
RenewableEnergyStocks.com Venture Capital
pages have extensive listings of venture capital funds that invest in renewable energy companies.
And never forget: past performance does not guarantee future profits.
THE PRIVATELY HELD COMPANY LOOKING FOR ANY KIND OF MONEY
The company may be a privately held renewable energy start-up businesses and seeking funding from any means.
This is the kind of opportunity that excites small investors who would love to invest a few thousand and watch it grow into a few million in a few years. But only a microscopic few of these opportunities make any money at all for investors.
Most lose every dime that’s dumped into them.
They will lose money for a host of reasons ranging from tough competition, to bad management, to outright fraud.
If you find yourself excited by one of these kinds of deals you should proceed with a huge amount of caution. Follow these suggestions to increase your odds of making a good investment decision, and decrease your odds of losing a lot of money:
1. At a minimum, the company must at least have a good business plan.
Learn about business planning as if you’re starting the business.
A great site to find examples of a start-up business financial plan, free business strategy plans, step-by-step instructions for starting a business, and a lot more is the
U.S. Government SBA Small Business Planner
As you look through the examples of a start-up business financial plan pay close attention to (among other things) the business terms used. Those business terms are the language of business. They will help guide you through the questions you must ask anybody who seeks your money to invest in their business.
2. When you invest in a company you are buying a piece of it. These resources will help you become a smarter buyer.
Investopedia Business Valuation
page has a number of good valuation articles and tips and is part of a vast business and investment library.
is loaded with business averages that can help you spot suspicious data on business plans.
Wikipedia Business Valuation
page details numerous aspects of business valuation and links to other valuable resources.
You may also find that you want to get some books on the subject.
Finally, don’t forget to talk with your local bank. Your banker knows business language and valuation inside and out. Tell your banker about the deal and you will be amazed by the amount of information, guidelines, and tutoring you receive.
3. After you complete steps one and two and decide that you still want to commit to an investment, study our pages on
Alternative Energy Investing Risks
4. The worlds of investing, business and finance, and energy have their own languages. Studying the links shown above will help you understand those languages; it will also help you learn what it takes for a company to succeed.
When you are talking with the founders of that ‘can’t miss’ start-up company, be sure they understand business, finance, and energy language at least as well as you understand it.
If any of these ingredients are missing, then you better ask yourself if you really want to throw your hard earned money at the deal. And if the founders of this ‘can’t miss’ renewable energy start-up business don’t have a business plan, don’t know at least the basic financial language of business, and don’t know even basic energy terms, then you better run away from the deal like a scalded cat - - - before you get burned.
5. After you have completed the above steps and decided that you are still going to commit to an investment, limit the amount you invest to a sum you can afford to lose.
Investing in small renewable energy start-up businesses is a high stakes gamble. That is especially true for the novice investor. No matter how fantastic the offer sounds, treat this kind of investing like a trip to a casino.
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