Investors looking to cash in on the multibillion-dollar electric vehicle (EV) segment are about to have a whole lot of choices...
Tesla is gearing up for intense competition, both in the United States and across the world. In Europe, for example, Volkswagen is now the top producer of electric vehicles. As companies like Ford, GM, Renault, and more step up their EV game, I expect the competition to grow.
And those are just the big-name automobile giants. EV startups are picking up the pace like never before. We've seen a whopping 22 different EV and battery companies make deals to hit the public markets via special purpose acquisition companies (SPACs) in just the last 12 months.
Even my own SPAC, 10X Capital Venture Acquisition Corp. (NASDAQ: VCVC), is taking an EV company public! In February, we officially announced plans to merge with REE Automotive, an electric vehicle tech startup, in a deal that's expected to value the company at around $3.6 billion.
But despite the flood of EV companies going public, savvy investors have a chance at scoring even larger returns from this industry...
There's a Huge Government Boost for EVs
The Biden administration has made plans to give the EV industry part of a massive $2 trillion government outlay. That's no surprise - President Biden has made moving away from oil a platform priority for his four-year stint in office. In March, the administration announced plans for one of the largest infrastructural overhauls the United States has seen since World War II.
If it passes, the bill would pour hundreds of billions of dollars into sectors like biotechnology, Internet, transportation, electric vehicles, and more. It's completely possible that this amount of cash will pull a brand-new generation of early-stage companies out of the woodwork across these sectors, ready to grow and compete for their share of the market.
That's certainly drawn a great deal of media attention to the obvious choice, Tesla Inc. (NASDAQ: TSLA). Let me put it this way: I can't remember a workday over the past year where I didn't hear or see Tesla mentioned in a headline.
And of course, there's nothing wrong with the stock. But...
I firmly believe that startups are where the serious opportunities lie in this sector. Tesla is already at the tail end of its growth compared to where it started years ago as a seed-stage company.
Think about it. Tesla was founded in 2003, meaning it had - and, for the moment, still has - significant first-mover advantage over any other electric vehicles that have entered the space since then.
When a company has a first-mover advantage, it was among the first to establish a market for whatever product or service it's selling. That means it can get a leg up and build its brand and customer loyalty before it's threatened by newer competition.
But first-mover companies will rarely fly solo in their industries for very long, especially as more entrepreneurs and their companies begin to see just how popular - and potentially lucrative - a space can be.
That's what we're seeing with Tesla this year, especially as the race to adopt clean energy becomes even more popular and lucrative across the board. For entrepreneurs, there's never been a better time to jump into this space, and for investors, the EV market is creating a generational buying opportunity unlike anything we've ever seen.
It's one of the biggest and most interesting phenomenons in the startup world...
The Disruptor Is Always Disrupted
Tesla was among the first to upend or "disrupt" the traditional automobile industry. But today, the company will have to reckon with the reality that other movers are entering the space, hot on its trail and ready to compete.
In Tesla's case, beating the competition will mean expanding to brand-new markets. The company recently announced plans to open up shop in Europe this year, where the electric vehicle industry is booming more than anywhere else in the world.
It's all a part of the startup cycle. Startups launch as tiny ventures that only dominate a sliver of their industries' market shares. But the startups that succeed (and I mean, really succeed) could one day rise to be their industries' next institution.
It's at that point that new startups come out of the woodwork to ride that tailwind and create a brand-new product or service that could ultimately disrupt the disruptor.
And that's exactly why the best opportunities in the electric vehicle space don't involve Tesla. Instead, investors should focus on these smaller companies, the ones capitalizing on Tesla's success and the EV market's popularity to build out their own smash-hit success.
Years down the line, all of that can lead to a sweet exit event - whether they're acquired by a bigger company like Tesla or whether they go public and hit the market themselves. For startup investors, getting in right now could kick back lifechanging returns during that type of event, all because you were there from the company's earliest days.
Consider this: 120 years or so ago, just as cars started "disrupting" the 5,000-year-old horse-and-wagon paradigm, a man named John S. Gray heard from his nephew about a promising, up-and-coming "startup." Gray decided to invest $10,000 in the small automobile maker... the Ford Motor Company. Over the next 16 years, that modest $10,000 stake paid out more than $10 million in dividends. By the time Gray's children cashed out, they'd pocketed another $26 million. You can learn more about that legendary deal and how those kinds of opportunities are now open to regular folks - often for far less than what Gray staked - right here.
With that said, so many companies are looking to make waves in the EV market, so you'll need to come prepared with a solid strategy before you decide where to invest your hard-earned cash.
I recommend you check out this completely free report from my friend and colleague, Neil Patel.
It's called "Investing in Private Startups Could 1,000X Your Money," and it'll take you through everything you need to know to make your very first angel investment (and do so successfully). Part of the report runs through the 10 characteristics of every single perfect startup company, so you can be confident you're putting your money into a company with the highest shot at success.
And to top it all off, Neil is sharing one of his picks with you for free. It's a company that's targeting a market worth $247 billion that made a sweet $2.5 million in sales last year.