This might sound awful, but I’m going to say it anyway:
I love it when I’m right...
Especially when everyone else is dead wrong.
For example, when Matt and I started Crowdability, people said we were crazy. They said individual investors like you would never make money in this market.
Well, today I’ll show you how we were right...
They were wrong...
And how you’re the real winner here.
Some Background
Before I show you why everyone got it so wrong, let me explain something:
Let me explain why our skeptics were so convinced.
You see, for the past 83 years, based on U.S. securities laws, only “accredited” investors were allowed to invest in private, early-stage companies.
Accredited investors have a net worth of at least $1 million, or earn at least $200,000 annually.
The Government put these rules in place nearly a century ago, right after The Great Depression. Its goal was to help protect “the little guy.”
Unfortunately, by keeping regular investors out of early-stage investing, it gave the wealthy a monopoly on one of the most lucrative markets in history.
55% Annual Returns
As Matt showed you last week, for the past 20 years, early-stage private investments have returned an average of 55% per year.
That’s nearly seven times higher than the stock market averages.
Now, as I mentioned a moment ago, historically, only wealthy investors could invest in early-stage private companies…
But a new set of laws known as The JOBS Act just changed all that:
Now anyone can invest in these exciting (and potentially, highly profitable) investment opportunities—and they can invest for as little as $100.
This revolution in early-stage investing is called “Equity Crowdfunding.”
With Equity Crowdfunding, many people (i.e., “the crowd”) each invest a small amount. And in exchange, they receive an equity stake in a start-up.
This revolution was our inspiration for starting Crowdability:
We knew that first-time private market investors would need help making smart investment decisions.
But not everyone was so enthusiastic about our idea...
The Skeptics’ First Objection
Here’s the first objection we heard:
“High-quality companies won’t raise money from individuals. They’ll want to get their funding from professional venture capitalists instead.”
But these skeptics were wrong:
Sure, plenty of companies still rely on traditional venture funding…
But plenty of others (including some of best start-ups in the country) are raising money using equity crowdfunding—and delivering big profits to early investors.
For example, as long-time Crowdability readers know, ReWalk Robotics returned 550% to early crowdfunding investors...
And Elio Motors helped investors make 325% gains in just six months.
So clearly, the skeptics were dead wrong about this.
The Skeptics’ Other Objection
But the naysayers were also skeptical about something else…
You see, to make a lot of money from early-stage investments, you need the start-up to get really, really big.
For example, at the time of its IPO, Facebook had nearly 1 billion users.
That enormous user-base is what enabled Facebook’s first investor, Peter Thiel, to make $1 billion when Facebook went public.
The thing is, historically, for companies to get that big, they needed a lot of investment capital:
Common wisdom said they needed to invest huge sums of money into thing like traditional advertising and expensive computer hardware…
And given their enormous capital needs, they needed deep-pocketed venture capitalists to pick up the tab.
But nowadays, free “viral marketing” on networks like Facebook can take the place of expensive advertising…
And instead of purchasing expensive computer hardware, start-ups today can “rent” what they need from Amazon at low rates.
In other words, things change...
And The Data Says...
This is exactly the point made by professional venture investor Bryce Roberts…
In fact, in a recent article, Roberts claims that the “common wisdom” is no longer valid.
And he claims that these changes are good news for investors like you.
Let me explain:
Bryce examined recent market data regarding companies that had either been acquired for a big price, or went public at a value of at least $1 billion.
Of these transactions, Bryce found that 70% of them followed the old paradigm:
Prior to becoming worth billions of dollars, each of them had raised over $100 million from professional venture capitalists.
However, 30% of those companies reflected a new paradigm. For example:
- Start-up AppLovin was acquired for $1.4 billion, despite the fact that it had raised just $4 million from individuals like you...
- Media.net was acquired for $900 million, even though it raised no venture capital funding…
- And Outfit7 raised no venture money either, and it was acquired for $1 billion!
Good News for You
Here’s why this is good news for you:
As more entrepreneurs realize they don’t need to raise huge venture rounds in order to become billion-dollar companies, two things will happen:
1. More high-quality start-ups will be eager to raise small amounts of capital from individual investors like you.
2. Early investors will own a bigger stake in those companies, because their investments won’t get watered down (“diluted”) by big venture investors.
Simply put, this means more investment opportunities—and more profits—for investors like you.
You can read Bryce’s full article here »
Happy investing!
Best Regards,
Founder
Crowdability.com
