Start-ups are my all-time favorite type of investment.
After all, the returns are 3x to 4x higher than stocks…
It’s fun and exciting to learn about cutting-edge technologies…
And you can help create jobs and boost the economy.
What’s not to love?
But there’s one thing that could make start-up investing even better — one thing that could give it a perfect score.
And now, it’s finally happening…
How To Make It Even Better
If I had a magic wand, I’d change just one thing about start-up investing:
I’d make it so I could sell my shares exactly when I wanted to.
You see, by definition start-ups are very young.
Generally speaking, it takes some time for them to mature, and it takes some time before the successful ones have an “exit” event.
An exit is when a start-up goes public or gets acquired. That’s when investors like you make your profits.
Sure, as long-time Crowdability readers already understand, plenty of start-ups have had big exits just months after we’ve told you about them.
For example, a start-up called Elio Motors helped many Crowdability readers make nearly 400% on their money in just 60 days.
But what if a start-up you invested in still has a ways to go before its exit — and you want some of the cash you invested now?
Well, traditionally, there wasn’t much you could do.
But now that’s changing…
Secondary Markets
You just learned about the two main ways start-up investors earn their profits:
IPOs and acquisitions.
But there’s also a third way:
Sometimes, investors sell their shares directly to others — they sell them to other start-up investors.
For example, look what happened with Uber, the transportation start-up:
A few years ago, our business partner Howard Lindzon bought some shares in it.
Since then, Uber’s become a huge company. Despite its size, however, it’s still a private start-up, and it hasn’t had an exit yet.
But Howard’s already sold his shares. Here’s how he did it:
A couple of years ago, Google decided to invest in Uber. The thing is, Google wanted to own more shares than Uber was willing to sell. So Google offered to buy out the shares of early investors like Howard.
That’s why Howard didn’t have to wait for a takeover or an IPO. He was able to sell his stock to another investor for a windfall profit:
For every $5,000 invested, he got back $2 million.
Until recently, this type of exit — it’s called a “secondary” transaction — was only available to wealthy investors.
But now it’s becoming available to all investors… including you!
The First Secondary Market for All Investors
Equity Crowdfunding, where regular investors like you buy small stakes in start-ups, has been legal in the U.S. for about one year.
But it’s been legal in United Kingdom for about five years.
So the results from the UK offer us a crystal ball — a realistic look at what the future holds for investors in the U.S.
And to put it simply, our future looks bright:
For example, one funding platform called Seedrs (“funding platforms” are the websites that connect investors like you to start-up deals) has raised in excess of $200 million for more than 380 start-up deals.
That’s a lot of deals. In fact, after just five years of existence, Seedrs has literally become the UK’s most active investor in early-stage companies.
But two weeks ago, Seedrs took its business one step further:
It launched a “secondary market” for investors who’d backed any of its deals.
This means start-up investors like you have the opportunity to sell their shares now — even if the start-ups haven’t had an exit yet.
And just like Howard discovered, the profits with this type of exit can be outstanding…
Early Returns
To show you just a few example from Seedrs:
- An investor in a software start-up sold his shares on Seedrs’ secondary market and quickly made about 860% on his money.
- An earlier investor in the same start-up made even more: he banked 1,500%.
- And an investor in an e-commerce start-up made almost 2,000%.
Can you imagine making a quick 2,000% profit?
That’s like turning a $500 investment into nearly $10,000.
Or $5,000 into a six-figure windfall… nearly $100,000.
Seedrs’ secondary market is still in its early stages, but given its success, we imagine platforms in the U.S. will quickly follow suit….
Here Comes the U.S.
In equity crowdfunding, the concept of a secondary market for start-up shares is often talked about as the “holy grail.”
As I put it earlier, that’s what would give start-up investing a “perfect score”
Not only could you back exciting, world-changing companies that could hand you huge profits — but you could turn your shares into cash right when you want to.
Perhaps that’s why secondary markets are a growing focus of several crowdfunding sites in the U.S.
A site called Acquire Real Estate, for example, recently introduced such a market…
So did a platform called Over The Counter (OTC) Markets…
And sites that Crowdability readers will be more familiar with, including StartEngine.com, are now hatching their own plans for such a service.
As these new services develop further, the big beneficiaries will be investors like us.
That’s why we’re keeping an eye on them.
As soon as they’re ready for your business, we’ll be sure to let you know!
Happy Investing.
Best Regards,
Founder
Crowdability.com
