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Blockbuster IPOs are famous for luring in investors hoping to cash in on the next breakout stock. But you can see even greater profits by investing in firms before they go public. And angel investing returns could be massive.
Angel investors provide seed money for new startups in need of capital. People typically become angel investors because they're looking for much bigger windfalls than you'd see from traditional stocks. But are the returns from angel investing worth the financial risk?
The truth about angel investing is that it's high-risk and high-reward. You could certainly lose some money, but the rewards far outweigh the risk. In fact, as long as you invest the right way, you could be looking at once-in-a-lifetime windfalls.
Those who bought Amazon from the jump saw profits as high as 14,000,000%.
Sounds too good to be true, we know. Click here to see the proof...
Now, you might be thinking that this sort of investment is only available to the wealthy elite. Not anymore. In fact, ever since the JOBS Act in 2012, everyday investors like you can be angel investors. And the best part about it is you can do it with as little as $50. We'll show you how in a minute.
First, let's take a closer look at the risks and rewards of angel investing - and why the returns from angel investing are worth the financial risk...
Angel Investor Rewards Outweigh the Risks
If you're a savvy investor, you can see big gains regardless of the risks.
But it's important you're aware of angel investor risks. The reality of investing in startups is that most of them fail.
Once a startup fails, an angel investor loses the seed money they put in. Unfortunately, many startups fail because they can't raise enough money in their second round of financing. So, if a startup needs to expand but it doesn't have money to fund it, it can flop.
But the startup failing isn't the only risk, either. Just look at Facebook Inc. (NASDAQ: FB). Once Facebook started to take off, co-founder Eduardo Saverin learned that his shares had been diluted. You see, famous billionaire Peter Thiel invested $500,000 into Facebook. This boosted its valuation significantly. But once Thiel invested, Saverin's 34% stake in Facebook plummeted to 0.03%.
There's quite a bit more to the story, but dilution is something that can happen. Fortunately, even with the dilution, Saverin is now a billionaire thanks to being an angel investor in Facebook. So, sure, there are risks. But the rewards greatly outweigh them.
That's a key feature of angel investors. They know the greatest gains come from the greatest risks.
How to Minimize the Risk of Angel Investing
Even though angel investing is riskier than traditional stocks, you could see life-changing windfalls. Of course, because angel investing isn't a foundational investment, you only invest money that you can afford to lose.
That's why we use the 50-40-10 portfolio model. The 50% and 40% are your defensive and growth stocks, while the remaining 10% is there for you to swing for the fences. Heck, you could even put less than 10% into investments like angel investing.
Whatever you decide to do, it's important to make sure you have traditional stocks for reliable returns. This way, if one or two of your angel investments take off, you could see 1,000% in returns that cover your losses from the flops. It sounds a little odd at first, but you could see nine out of 10 startups fail and still find huge success with the 10th one. And it could more than make up for the nine losses...
Angel Investing Is Worth the Financial Risk
One small investment of as little as $50 could turn into hundreds, thousands, or even millions of dollars. Those are returns that you just won't find with traditional stocks.
Take a look at Uber Technologies Inc. (NYSE: UBER). If you had invested $50 just a couple of years ago, you could've made as much as $250,000 at its 2019 IPO.
If you were one of the original angel investors in Amazon.com Inc. (NASDAQ: AMZN), your returns could've been ever crazier. In 1995, 22 angel investors each put in $50,000 into Amazon. In 2019, those shares are now worth $8.5 billion. That's a 17,000,000% jump in value...
Those are just two examples of some of the biggest angel investor returns.
But as an angel investor, you could see returns of 1,000% or even 10,000,000% with the right picks. But where do you find startups to invest in? Better yet, how do you know which ones are poised for breakout growth and which ones are flops?
That's where Angels and Entrepreneurs comes in. You see, Neil Patel created the Angels and Entrepreneurs Network to help everyday people become angel investors. He did this because angel investing doesn't have to be - and shouldn't be - exclusive to those with a spare $50,000 in cash. In fact, he thinks everyone should be able to experience life-changing windfalls. That's what makes Angels and Entrepreneurs so lucrative for investors like you. Neil Patel is partnering up to provide you with information, connections, and more through what they've learned from their combined successes.
As a Member of the Angels and Entrepreneurs Network, information on two great startups is rushed your way. Every month after, you'll receive two angel deals poised for breakout growth. Plus, you'll get access to key startup information like risks and advantages.
Beyond that, you'll be given instructions on how to start, updates on investments, and plenty more.
Really, you'll be able to network with other Members, speak with startup founders, and talk with famous angel investors through the "Virtual Boardroom." So, with the Angels and Entrepreneurs Network, you could find out exactly why the returns from angel investing are worth the financial risk. Become a Member here for massive windfalls...
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About the Author
Daniel Smoot is a Baltimore-based editor who helps everyday investors with stock recommendations and analysis. He regularly writes about initial public offerings, technology, and more. He earned a Bachelor's degree from Towson University.