2. Understand the Risks
Most startups fail; it’s just a fact. Whether you are contemplating a small investment or a multi-million-dollar deal, investors need to be realistic; success is not guaranteed. Most experts say that if you are stressing as you open your checkbook, the time might not be right for the transaction.
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One helpful hint is to hire a financial advisor to walk you through the process (most rheumatology practices work with an accountant or brokers, so you might start by asking them questions). Financial advisors can provide guidance and assess the level of risk you are comfortable with.
3. Be Ready to Write Another Check
If you find a great idea, a great bunch of people to work with and are willing to join the venture, don’t be surprised if the first investment is not your last. Small businesses and early-stage startups typically take a few years to turn a real profit. Most need to raise capital on a regular basis, via loans or additional investors.
“Be prepared to do follow-on investment to support the mission,” Mr. Cegielski says.
Market shifts will affect your investment, Mr. Cegielski says. Hot markets make it easy to raise capital, but those “windows can close” fast. “Hopefully, entrepreneurs have some good underlying partners to back them as they go forward,” he says, noting the best scenario is when investor and startup share the same goals.
4. Exit Strategy
Whether things go great or go sour, a clear exit strategy is smart business. At a minimum, your business partners should provide a list of competitors who might be interested in an acquisition. A strategy to go public is advisable, and other opportunities should be laid out up front. Discuss this with your financial advisor and potential partners before signing on the dotted line.
5. Be Patient
Investing is a lot like making a fine wine. You aren’t going to see returns on your investment the minute you mash the grapes.
“Ultimately, investors who are aligned with your mission will need patience. When you are attempting to do something substantial in scope, it takes time,” Mr. Cegielski says. “[Rheumatologists] need to be financially and mentally invested.”
Mr. Cegielski says the healthcare market is developing rapidly, with small solutions showing promise, more manageable technology costs and larger players (i.e., insurers, health systems) taking notice.
“As an entrepreneur, it is a really exciting time to be trying to address large problems that affects hundreds of millions and billions of people,” he says. “It’s not going to be long until everyone on the planet has access to some sort of connected, mobile device.”