Investing in the Next Big Thing: How to Invest in Startups and Equity Crowdfunding like an Angel Investor
There's a Secret World of Investing Controlled by Angel Investors and Venture CapitalOne investment has been the secret of the wealthy for more than 80 years. It accounts for nearly a fifth of the wealth for million-dollar investors and nearly four-times the return compared to stocks.
For more than eight decades, anyone with less than a million dollars was locked out of this investment.
Government regulators reasoned that investors like you and me werenât smart enough to handle the high risk and higher return.
That all changed in 2016, when for the first time in a century investment in startup companies became open to everyone.
Investing in startups has led to an average 27% return for wealthy investors, nearly four times the average 7.4% annual return on stocks over the decade to 2013.
When asked where they invested their money, investors with an average of $7.6 million told BNP Wealth Management those alternative investments like venture capital and startups were their second-largest investment after their own business.
But the government is right in that the risks are high for startup investors. A study by Willamette University of 1,200 investments by angel investors found that more than half of startups fail to return even the original investment. Just a fraction of those investments accounted for the vast majority of gains.
But those gains in startup investing can be spectacular.
Consider Peter Thielâs 2004 investment of $500,000 in Facebook as its first outside investor. Most of us werenât able to invest in the social media giant until it went public in 2012.
By then, Thiel had already made $1.7 billion for a 340,000% return on his investment.
Welcome to the World of Startup Investing and Equity CrowdfundingIâve spent nearly a decade analyzing startup investments for venture capital firms and angel investors. I set up the research department for one venture capital investor and managed a team of six analysts, pouring over pitch material and market research to find the best startups in which to invest.
When equity crowdfunding became popular in 2012, I knew it held the potential to break the 80-year ban on startup investing for everyday investors. I refined my proven methodology for venture capital investing and waited for the law to be changed.
Investing in startups is like nothing youâve ever seen in the stock market. These companies arenât covered by analysts, and you wonât find a P/E value on Yahoo Finance. You wonât hear other venture capital investors or angel investors sharing their process or picks on TV either.
They donât want you stealing those 27% annual returns.
Thatâs what this book is all about, using a process I have developed over years as a venture capital analyst to avoid the risks in startup investing and find the best deals.
Itâs not an easy process. It involves research and strategic planning on your part. Iâm ready to share it with you if youâre ready for the challenge.
In this book youâll learn:
- My quick checklist of what to look for in a startup to weed out the losers before wasting your time on valuation (Page 53)
- The process I use to value startup companies for venture capital firms, including how to research the market and understanding deal terms (Page 63)
- Three different valuation methods I use with every deal that gives me more certainty in the upside (Page 83)
- A startup investing strategy that puts your money in the best deals and avoids chasing the losers. (Page 107)