How to Invest in Private Companies
On the whole, investing in public companies is a lot easier and more straightforward. Their shares trade on open markets. They are required to report audited quarterly and annual financials to their regulatory agencies. It’s easy to tell how much other investors are valuing them. And there are no restrictions on who can invest based on income level or net worth.
Private investments are difficult to find. Private companies do not have to report to a regulatory agency. Private companies’ values are difficult to determine. And there have always been financial restrictions on them that have kept all but the super-wealthy from participating.
But, on the whole, the best profits come from private investments. That’s why the rich keep getting richer while the rest of us hope and pray that the 6% average gain from stocks will carry us into retirement.
But that all changes today.
Because of a landmark ruling from Congress, the private markets that have minted literally every billionaire on the planet are now open to you.
I’ll go into the legislation in a little more detail later, but first, let’s talk about this market for a little bit and discuss why the profits can be so explosive.
I think the easiest way to do that is with a few examples from the real world. So, let’s look at some formerly private companies and compare the private profits versus the public ones...
First, let’s take a look at eBay. Investors who bought eBay stock at its IPO were rewarded with an 872% gain within the first 12 months. That’s a really good investment right there — it would have turned every $1,000 invested into nearly $10,000 in just 365 days.
But the people who were able to invest in eBay before it went public were the ones who really took home the prize. Their gains were so big they honestly make that 872% look like a loss.
That’s because the private investors in eBay cashed out with a 105,000% gain! That would have turned every $1,000 you invested into over a million!
Imagine what you could do with a million bucks! Pay off all your debt and set up a college fund for your kids or grandkids. Buy a vacation house, a shiny new boat, and a big truck (or EV) to pull it.
Or reinvest it in the next eBay before it goes public, and turn that million into a billion. That’s how the rich keep getting richer. And that’s why they can afford to lose millions on one investment... because they know they’re going to make it back tenfold on the next one.
But in case that’s not enough to get you excited, let me give you another example with LinkedIn, the social networking site for businesses...
If you’d invested $10,000 into LinkedIn when it IPO’d, you’d have watched as your shares ran up 336% before the company was bought by Microsoft. That would have turned every $10,000 invested into $43,555. And, again, that’s a pretty stellar return on your investment.
But it pales in comparison to the profits private investors walked away with. Honestly, those gains even make eBay’s private investors look like losers.
LinkedIn’s private investors cashed out an unimaginable 261,900% gain when the company went public. That meant the same $10,000 investment was worth well over $26 million.
Even just a $1,000 private investment would have let you walk away with over $2.6 million!
Think about what you could do with a $2.6 million profit. About 2.6 times as much as you could do with an extra million, huh? That sounds pretty good to me.
But it’s not even the tip of the iceberg when it comes to the kinds of profits private investors take home.
So, I’ll give you one more example, and then I’ll explain how you can start making your own private profits...
Amazon has been one of the most successful investments in history. The stock went public at $18, and it’s sitting well above $3,000 a share now.
That means investors who scooped up shares in the IPO are looking at over 17,656% in profits right now. A $1,000 investment is worth $177,560. And anyone who had the foresight to put in $10,000 to start is a millionaire thanks to it, with a position worth over $1.7 million today.
That’s a great gain. It’s one any analyst or investor should be incredibly proud of; it’s a success. But it’s not even close to the kind of success Amazon’s early investors had. You might not even believe me because their gain was so astronomical...
Those investors walked with a 13,999,900% profit!
With that kind of gain on their investment, even if they’d only put in a dollar, they’d be looking at an investment worth $140,000. $100 would have grown to $14 million. And $1,000 would be worth $140 million!
Anyone who invested $10,000 in Amazon before it was public is now a billionaire with their investment worth a whopping $1.4 BILLION.
I don’t know about you, but I’d prefer the 14,000,000% gain to the 17,000% one.
But the thing is... none of us could have invested in those companies because the private market was still off limits to everyone but the super-wealthy or incredibly well-connected. If you weren’t already a millionaire with a network of investments, you were SOL.
But that’s all changed. And now, today, you’ve got the change to invest in the next eBay, the next LinkedIn, and the next Amazon... all before they go public.
Here’s Where It Really Gets Interesting
Thanks to a landmark decision by Congress, the private markets I’ve been describing are now open to anyone — no matter how much they make, how much they’re worth, or who their parents were.
But, now that the market is open to all, there are a lot of sharks out there trying to take advantage of inexperienced private investors. They’re trying to get rich off your hard-earned money.
And that’s not okay with me. I’ve long despised the pump and dumpers who buy penny stocks and drive the price up, so they can sell for a profit and leave retail investors holding the bag. They’re one of the reasons I keep doing this work — so you can get some honesty in your financial news.
And now I’m taking my battle against these kinds of scams into the private markets as well because there are just as many bad characters out there, and it’s even easier to fool someone when there isn’t a lot of information available (as is the case with private companies).
I gave two examples earlier this week. I highly recommend you go back and give that article a read. It gives you a good idea of what kinds of scams are out there and how easy it could be to fall victim to one. You can get to that article by clicking this link.
But I’ll quickly summarize them for you here, too.
One was a seed investor explaining why his company was looking for retail investors and not institutions (like Morgan Stanley, where I cut my teeth, so to speak). He pretty much told me he couldn’t go to institutions with a price tag that high — they’re too smart. But he was sure retail investors were dumb enough to give him the money if he told the company’s story well.
He was probably right, too. But I’m not going to work with someone like that. Sure, I like to make money but not by stealing it from others. So, even though the company had a great idea and a solid team behind it, I passed on that one.
The other example was a company with a good price, a good product, and existing revenues to boot. — all signs of a great private investment. But then I looked at the capital structure of the company. That’s a fancy term for who owns what and how much they paid for it.
Once the funding round was completed, the early investors would have owned close to 90% of the company, while the later investors footed about 90% of the bills. I compared it to you and I buying a beach house together, where you pay $900,000 and I pay $100,000, but I get the house 10 months out of the year. Not really a fair trade for you.
And that’s just a couple examples I pulled from the past few months. I could go on for hours about terrible structures, sky-high price tags, and otherwise shady business. But I think I’ve made my point.
Private investments live in murky waters. And that’s a shark’s favorite place to hunt.
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Your Financial Shark Cage
Because of all these conversations I’ve had with less-than-scrupulous founders and investors, I couldn’t help but feel like retail investors didn’t have anyone on their side.
I saw how terrible these deals were and turned them down, but the companies still raised the money anyway. And most of that money came from people who can’t afford to lose it.
Retail investors needed someone in their corner. These companies hire countless experts in structure, financing, marketing, everything. You should have someone trained in this market who's got your interests at heart, too.
So, after months of meetings with the management here at our parent company, I got approval to launch a first-of-its-kind investment advisory service.
It’s focused only on these private investments that are now open to everyone. And the goal is to provide a hand-picked list of private investments that I’ve personally selected and vetted myself.
I use the skills I’ve acquired over my own career as an investment banker and private investor to analyze each company and proposed deal with the eyes of a Wall Street professional.
And I use the network of entrepreneurs, angel investors, and fund managers I’ve built over the past two decades to bring investors the best deals available.
That helps make sure that my investors ONLY get the top opportunities out there. And NEVER get suckered into a scam that's just designed to take their money.
It’s like having a shark cage to keep the predators on the outside while you enjoy the beauty and wonder of the private markets.
Venture Investing for Main Street
As I said, Main Street Ventures is a first of its kind investment newsletter. It’s all about private investing for the rest of us. And it allows my readers to take advantage of the network of legitimate founders, investors, and entrepreneurs I’ve built over the years. But more important than that, it allows me to share a hand-curated list of pre-IPO investments with people like you.
That’s the opportunity I want to offer today…
Because you’ve been a loyal reader of my commentary here in Wealth Daily for all these years, I want you to be one of the founding members of this landmark service.
I want you to get a chance to make the life-changing profits that only come from pre-IPO investing. I want you to feel the excitement building as you watch your small company grow into a household name. And I want you to know the rush of selling your private shares into an IPO as you make your first successful exit.
I want you to know the thrill (and the massive rewards) that got me hooked after my first private investment and have kept me coming back for decades. I want to help you find the next Amazon while shares are still getting sold over the table for $0.50. And I want to get you invested in the next LinkedIn before it gets a massive buyout offer. And I want to help you avoid those sharks out there hunting for inexperienced investors to eat alive.
I want to be your guide along the way, helping you avoid the mistakes I made as an early investor and capture the massive profits that only come from investing in private companies.
So, if you’re interested in getting a piece of the profits that used to be off limits to all but the uber-rich, take a little time today and learn more about the service I created to help you navigate the murky waters of private investments.
You can check out the presentation I put together by clicking here. I encourage you to spend a few minutes today and watch the whole video. It's very entertaining, and I think you'll really enjoy it.
And, at the end, there’s a special offer I’ve put together for you if you decide to become a founding member of Main Street Ventures.
I’m looking forward to seeing your name on my list when I send out my next private investment.
To your wealth,
After graduating Cum Laude in finance and economics, Jason designed and analyzed complex projects for the U.S. Army. He made the jump to the private sector as an investment banking analyst at Morgan Stanley, where he eventually led his own team responsible for billions of dollars in daily trading. Jason left Wall Street to found his own investment office and now shares the strategies he used and the network he built with you. Jason is the founder of Main Street Ventures, a pre-IPO investment newsletter, the founder of Future Giants, a nano cap investing service, and authors The Wealth Advisory income stock newsletter. He also contributes regularly to Wealth Daily. To learn more about Jason, click here.
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