(How To Invest In Startups And Make Money (part2
The Smart Money Goes to Startup Investing
Investing in startups iswhat many intelligent, successful, wealthy individuals do when they have to put their own money to work. That should speak for itself.
When people need money for their business, they turn to wealthy investors as seen on ABC’s Shark Tank. Think Mark Cuban, Daymond John, and Barbara Corcoran. Then there are Silicon Valley legends like PayPal co-founder Peter Theil.
Thanks to the JOBS Act, investing in startups is no longer only the reserve of the uber-wealthy. It is now effectively open to all accredited investors. Those that have thrown themselves into this wealth vehicle have been finding very exciting results. Even New York Times Bestselling author Tim Ferriss, says “so far my startup bets are 10x+ more successful than my publishing career.”
The bottom line is that if you take a moment to look at your finances, investment projections, retirement needs, and both financial and non-financial goals; investing a portion of your investment portfolio in rapidly growing startups may help to achieve this goal and help close the gap, but it’s in no way a guaranty and it’s highly risky.
How Can I Invest in Startups?
Angel investor Paul Graham says after selling his startup he planned to do some startup investing. Although he is now one of the most recognizable voices in this arena it took him 7 years to get going; saying “I put it off because it seemed mysterious and complicated. It turns out to be easier than I expected, and also more interesting. The part I thought was hard, the mechanics of investing, really isn't. You give a startup money and they give you stock.”
That was years ago. Now there are many more, and easier ways to invest in startups:
· Investing via venture investing platforms for direct investments
· Via personal connections and relationships with entrepreneurs and founders
· Attending pitch events
· Join a syndicate on AngelList if you prefer to follow other investors
Generally you simply make the investment in person or via an online platform, and receive preferred stock, or convertible notes or SAFE notes which convert your interest to stock at the next major milestone.
How to Cash Out from Investing in Startups
Gains from investing in startups may be realized in several ways:
1. The startup is acquired by another company (think Instagram and Facebook)
2. The startup goes IPO
3. The company begins paying dividends
4. Investors sell their shares to other investors