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To say "we're in an IPO boom" is really putting it lightly. By the end of April 2021, we'd seen 451 IPOs hit the public markets, far more than the 407 IPOs we got in all of 2020.
During the last widely recognized IPO boom – between 1999 and 2000 – market-watchers clocked 856 IPOs.
So as of mid-May 2021, we're clearly on pace to demolish that 21-year record, and given this year's IPO "landscape," there's every chance the record will fall this year.
This time, there's a difference, particularly when it comes to tech IPOs.
Thanks to the media, the public profile of these IPOs is unprecedented. You and I might call it "hype," and it isn't an accident. There's a good reason for this profile: Companies that go public via splashy, high-profile IPOs capture investor attention and ignite that "FOMO fire" needed to attract more capital to fuel growth.
And part and parcel of the hype, the valuations involved are, in a lot of cases, absolutely stratospheric – I mean nosebleed-high.
It all sounds spectacular, right? There's a big problem, though – an elephant in the room – and it's definitely not being addressed in the media…
Where are the profits and performance to match the hype? Where the heck are all the returns?
I found them…
The Case of the Missing Returns
Snowflake Inc. (NYSE: SNOW) went public in September 2020 in what was the year's biggest offering. The company raised $3.4 billion at an impressive $33 billion valuation… which also landed it the title of the biggest software IPO in history.
Investors who got in right at the company's $120 share price ended the day happy after the company closed its first day of trading at around $240. By early December, shares hit a whopping $429.
That's not bad…
But with the exception of a spike six months ago, the stock has been on a consistent downward trend since then. As I'm writing this, Snowflake is worth around $195 per share. That's still an increase from its original offering price, but a near-50% slump from December's closing highs.
And Snowflake's story is not unique. No matter the sheer amount of money these offerings generate, tech IPOs tend to underperform across the board.
Here's the part that doesn't make it into breathless media soundbites and social media posts…
This sluggish performance isn't actually a "problem" – unless, like 99% of investors, you bought the shares at market. In fact, it's completely normal, even expected, if you think about the entire lifespan of a company.
The truth is, a company going public is normally at the tail end of its growth compared to where it was as an early-stage startup company.
Put another way, by the time its shares hit the Nasdaq or NYSE, a company has already done most of the growing it'll ever do, all things being equal. The reality is retail investors miss around 95% of potential gains when they invest on the market debut of a publicly traded tech company.
They're simply on the wrong "side" of the IPO.
Those "missing returns" I mentioned a minute ago go to people who invested at the earliest stages. They can be spectacular. Some early investors made more than 6,400% on the hyped-but-ultimately-underwhelming Coinbase Global Inc. (NASDAQ: COIN) direct listing.
Let's take another look at Snowflake, the company that made such a huge splash that it ultimately fizzled. Bear in mind, retail investors who managed to get SNOW shares and have hung in there since September have realized, at best, a 50% gain.
But Sutter Hill Ventures, which has invested less than $200 million since Snowflake's Series A funding round in 2012, owned a stake worth $12.6 billion following the company's exit – more than 60 times the initial investment. Sutter Hill's Managing Partner, Mike Speiser, was Snowflake's first CEO.
Now, of course, very few people have $200 million on hand to back new ventures. Very, very few.
But these days, it's possible for just about every investor – even folks with little more than a hundred bucks to work with – to become a "player" in this extreme-profit space.
Here's what to do…
Your Best Shot at Beating Retail IPO Investors to the Punch
Over the last 20 years, we've seen an IPO pop every five years or so, with a massive boom each decade. Based on the cycle, it's not unreasonable to predict another major IPO pop in the next five to 10 years or so. Keep in mind that it generally takes anywhere from three to 10 years for a startup company in its earliest stages to mature.
That means the tiny startups raising seed stage capital right now – the youngest companies out there, with the lowest valuations – could be the next biggest IPO superstars.
But the next boom will be revolutionary because, as I mentioned, it will be the first time in history that you don't have to be a part of society's upper echelons to make a life-changing return from a startup's exit.
You can invest in seed stage companies right now… And it's completely possible that the startup investments you make today could back the next Facebook, Amazon, Apple, Google, or any other institution we know and love today. They were all startups, and at one time or another, their founders looked to venture capital and outside investors to help fuel their earliest, most impressive growth.
You can get your piece of that success, no matter your background, no matter where you went to school (or didn't), or how much money is in your bank account.
That said, time is ticking…
Here's Where to Look Right Now
I get it. Millions of startups launch each year, and statistically speaking, not all of them will make it to the big leagues. Picking the ones with the best shot at success is a challenge, especially if you're just getting started in the startup investing world.
So, my team and I have put together a free special report – "How Investing in Private Startups Could 1000X Your Money." It's essentially a play-by-play – everything you need to know when thinking about making the angel investment that could very well change your life.
There's way more than that: The report includes a free deal recommendation, fully researched by my team. We think this company is the perfect example of exactly what to look for when scouting your own deals, and so we're comfortable recommending it. I've personally interviewed the founder, and I'm confident this deal recommendation could put you on the path to a 1,000X return right now.
You can click right here* to get the 1000X report, absolutely free, and my team will fire it off to your inbox in minutes. You'll also get a free subscription to my Startup Investors e-letter, with access to any free recommendation, plus regular tips and tricks to help you make the most of your angel investing startup-scouting career.
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