Stocks can be lucrative. But they won't multiply an investment like pre-IPO investing can.
Angel investing used to only be open to the elite and connected investors, but this is no longer the case.
We're going to show you how you can replicate the success of big-name angel investors. And you might be surprised at how easy it is to get started.
Chris Sacca began as a Google employee. He started early-stage investing with stakes in Twitter Inc. (NYSE: TWTR), Kickstarter, and Instagram. And now, his firm, Lowercase Capital, has put Sacca's net worth to over a billion dollars.
This Investing Trend Has Made Millions for Decades: In 1968, one tech IPO could have turned $50 into $5 million. Click here to see how they did it.
Amazon.com Inc. (NASDAQ: AMZN) also owes its early survival to angel investors. Founder Jeff Bezos had 22 angels that supported the company as an online bookseller in the 1990s. Those investors put up about $50,000 each in exchange for 1% of the company, shares that are now worth over $8.5 billion. That's a gain of 17,000,000% in 25 years.
However, you don't need $50,000 to get a piece of the next Amazon or Twitter. Now, you can get started for as little as $50.
We'll show you how. But first, there are a few things to know about before becoming a pre-IPO investor.
What Is Pre-IPO Investing?
IPO investing is considered somewhat risky because these offerings are riddled with hype by the time they reach the market. What we're talking about here is something much different. Getting in well before the IPO helps investors to judge a company based on real potential, without any extra Wall Street buzz to cloud their judgment.
Angel investing sounds similar to venture capital. But investing in pre-IPOs as an angel is a bit different.
Angel investors typically get in even earlier than a venture capital investor. And the company is typically valued at under $5 million. Angels will fill a gap after a company owner has gotten initial funding from friends and family but before the venture capital crowd gets wind of the opportunity.
In short, these are businesses that have a solid foundation and a good idea. They are also to the point of producing revenue but haven't scaled up their operations quite yet.
While many venture capitalists are part of hedge funds or bigger businesses, a majority of angel investors work on their own. This way, they can choose to invest in different opportunities they find attractive, without the bureaucracy of getting a committee's approval for a new deal.
Angel investors get to decide what they're interested in. Then, they get to personally interact with the businesses' owners and decision makers.
Of course, there is a risk-reward factor involved. If you want a low-risk investment, you can stick to blue-chip stocks. But you won't get that personalized access or have the potential for monumental gains.
On the other hand, you can choose to back what is potentially the next Microsoft or SpaceX and make a killing.
Now, here's how you can begin your own pre-IPO journey...
How You Can Get Started Investing in Pre-IPOs
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If you're interested in investing in pre-IPO opportunities, you'll need a good strategy as a foundation.
When it comes to angel investing, Money Morning recommends that you allocate small amounts of your overall portfolio into startup investments (no more than 10% total).
This way, if a majority of your investments don't perform as expected, you won't lose much. But you will still have the opportunity for market-beating gains.
Investing in some of these companies is similar to buying shares of stock. The difference is that it's not on a public exchange like the Nasdaq or New York Stock Exchange. Your ownership terms might also vary slightly.
Some angel investing deals involve receiving shares of preferred stock for your money, which is going to give you more privileges than common stock. Others will get you bonds or convertible debt that you can convert to common stock later.
However, it's the potential upside on these investments that should get your attention more than anything.
Consider Uber Technologies Inc. (NYSE: UBER) as just one example. If you had invested $50 in this company as a startup, that tiny amount could be worth more than $250,000 today.
The even better news is that you don't have to comb through all of these opportunities on your own. We can help.
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