How to make your first tech investment in 6 steps

At LEAP 2024 we welcomed more than 1,200 investors to the exhibition floor – where they discovered innovative startups, expanded their networks, and selected new investments to add to their portfolios. 

But if you’re a new tech investor taking your first steps into the investments ecosystem, it’s not always easy to know where to start. How do you choose your first tech investment – and what are the steps you need to take to assess it? 

Here’s our quick guide to help you get started, complete with tips from some of the industry’s leading investors. 

1. Learn about startup stages 

You’ve probably already done this. But we’re working on the knowledge that not everyone knows where to look for key information when they’re new to the game – so we don’t mind stating the obvious. 

Before you think about investing, you need to understand startup stages. Funding stages for startups are known as pre-seed, seed, Series A, Series B, and so on. Each stage is associated with a different set of milestones, typical valuations, and a different level of risk. 

Get familiar with the stages and their characteristics, because this knowledge will help you identify the investment opportunities that are right for you. 

2. Develop your own investment thesis 

Yes – the next thing you need to do when you’re ready to launch into your journey as an investor is take a very big step back. 

Now is the time to define your goals, dig deep into your risk tolerance, and figure out what kind of startups you want to be involved in. You might get specific about the startup stage (for example, choosing to invest in early-stage startups, or opting for more established companies approaching a growth phase); decide you want to invest in startups with a mission that aligns with your own; or you might look for founders from particular demographics. 

For example, when we interviewed Isaac Applbaum (Founder and Partner at MizMaa Ventures), he said that his own philanthropic work guides his decision-making when it comes to investments. 

“I use my social and ethical yardstick when I work with my companies,” he said. “It is critical that the companies I work with serve some sort of societal benefit. I am not extreme in the sense that I’m an impact investor or only invest in climate, but I strongly believe that building products/companies with a benefit to society will both help the company be successful, and also fulfill our responsibility to society.”

And William Bao Bean (General Partner at SOSV and Managing Director of Orbit Startups)

said, “For us the number one driver is ‘Can we be helpful?’” 

“No one works with Orbit for our money, they work with us for our help. We write small cheques and we take a good amount of equity. So what really matters is the help, because we do our best in every company we work with and then we follow on – but we take equity for our programs as well and it’s expensive. We have a very high Net Promoter Score from our startups because they feel that they get value.” 

We recommend talking to more experienced investors throughout this process to help you identify your own blindspots and build an investment thesis that truly reflects your goals and ambitions. (LEAP is a great place to meet those senior investors, by the way). 

3. Expand your network

Your network is an essential resource as an investor – offering investment leads, partnerships, and mentorship to guide you in the right direction. You need to expose yourself to as many deals as possible and build your understanding of common mistakes and conflicts; and your network can connect you with a flow of high quality deals, and opportunities to invest in collaboration with your peers. 

You knew we were going to say it, but we’ll say it anyway: attend the best tech industry conferences and networking events you can find. 

But you can network from your desk as well. Engage with other investors’ content on LinkedIn, get involved in investor communities, and reach out to people you’d like to get to know. 

4. Focus on the team you’re investing in – not just the product 

You’ll encounter tech products and services that you get really excited about. They’ll spark your imagination and alter your vision of the future. But before you peg your cash to the most exciting product pitches, step around the hype and look behind it – at the team that’s putting it all together. 

Arguably, the team behind a startup is more important than the product or service itself. Do you research and assess the skills and experience of the founding team. Do they have the ability to execute? Are they genuinely passionate about the product they’re bringing to market? 

Speaking on the LEAP:IN podcast, OHamad Al Fahad (Managing Partner at Tajawoz) said he seeks startup teams that demonstrate their ability to be efficient and clear. “Be efficient with your words,” he said, “which shows me that you’re efficient and practical with your thoughts and actions. And then as an investor, I know you’ll be efficient and resourceful with the money I give you.” 

5. Do due diligence before you commit 

You’ve probably heard investors talk about ‘due diligence’. But what does due diligence in investing really mean? 

It means research. 

You need to build a comprehensive understanding of the startup, its business model, its financial planning, and its intellectual property. The founders will give you information about their market, but you need to conduct your own market research too. Do you really think this startup has found product market fit? 

Identify every potential risk you can, and validate the startups claims through your own research. 

6. Start small to build your portfolio and your confidence at the same time 

When you decide to invest, you’re excited. You’ve found the thing: the startup that promises a bright future and strong returns. 

But reign in your enthusiasm for a moment, and start small. Invest an amount that you can afford to lose – because right now, your key return on investment is experience, not money. You’ll build your portfolio over time, but in the early days it’s critical that you gain real-life investing knowledge, navigate challenges without too much risk attached, and build your own confidence as an investor. 

You’ll learn exactly what mistakes you made in your startup selection process and due diligence, allowing you to fine-tune your strategy for bigger investments in the future.