Did you hear the crazy news about the high school in California?
It just landed a windfall worth $24 million.
The thing is, its payday didn’t come from a wealthy alum or a federal grant.
It came from a less conventional source:
Start-ups.
A True Story
A few years ago, a tiny company called SnapChat was just getting started.
It was creating a new type of app where messages and pictures would “disappear” soon after they were delivered.
Some staff members at St. Francis High School in California heard that SnapChat was raising money — and through a parent at school, St. Francis was introduced to SnapChat’s founders.
These staff members soon decided to invest $15,000 of the school’s endowment into the fledgling start-up.
Then, when Snap went public earlier this year, St. Francis’s cashed out…
For an estimated $24 million.
The Story Nobody’s Telling
Since then, media outlets from CNN to Forbes have been covering this story.
But most of them have left out a crucial part:
When St. Francis was considering an investment in SnapChat, plenty of other investors — including many professionals — were doing the same.
But most decided to pass.
The question is, why? Why did St. Francis feel so comfortable investing when so many “professional” investors walked away?
Today I’ll reveal the answer to the question…
And most importantly, I’ll show you why St. Francis’s investment secret could help you succeed with your start-up investments.
“I Hated the Design”
In addition to being one of the highest-paid actors in Hollywood, Ashton Kutcher is also a well-known early-stage investor.
And as it turns out, he passed on the opportunity to invest in SnapChat.
You might think Kutcher passed because he uncovered some weakness in the company’s product, business model, or marketing strategy.
But Ashton’s decision-making process was far more emotional than that.
As he said at the time, SnapChat “wasn’t beautiful or elegant. And I have this dumb, personal pet peeve about that, and it really bugged me.”
Basically, Kutcher didn’t like the way Snap looked.
The way a product functions is critical… but how a product looks hasn’t proven to be a strong indicator of future success or failure.
As a case in point, look at Google’s homepage:
It’s been the same bare-bones search box for nearly 20 years. And yet it’s become of the most valuable companies in the world.
But Ashton isn’t the only one who passed for a seemingly trivial reason…
Ignore this Email
In the world of early-stage technology investing, Chris Sacca is a legend.
He got in early on such companies as Twitter, Instagram, and Uber — all of which became multi-billion dollar homeruns.
Back when SnapChat was getting started, Chris met with one of its founders. The next day, the co-founder emailed him to follow up and explore an investment.
What did Sacca do?
He ignored the email.
Basically, Sacca thought SnapChat was “kid stuff” — something that might appeal to a handful of teenagers.
Whoops:
Today, 166 million people use SnapChat every day.
As it turns out, “kid stuff” can turn into a big business…
Which is precisely why St. Francis was so interested in investing in SnapChat in the first place.
Let me explain…
Bring on the Kids
Chris Sacca and Ashton Kutcher are successful, intelligent investors.
They didn’t pass on SnapChat because of a lack of smarts.
They passed because, sometimes, it’s hard for middle-aged investors to see the “brilliance” of a product that was designed for youngsters.
That’s why it pays to have a “secret weapon”…
For example, look at famed investor, Peter Lynch.
Lynch is the stock-picker who ran Fidelity’s Magellan Fund for years. During his 13-year reign at Magellan, he racked up 29% annual returns.
And one of the ways he found new investment ideas was by sending his daughter to the mall with some spending money. She was his “secret weapon”…
After seeing which stores she bought from, he’d analyze the stocks of those companies and look for hidden gems.
When you think about it, this strategy makes sense:
Kids intuitively know “what’s cool” and “what’s next.”
They perceive things that the average investment analyst (middle-aged, getting flabby, wedged into a cubicle all day) tends to gloss right over.
And as St. Francis High School discovered, this strategy works for start-up investments, too.
Borrow this Strategy for Yourself
The folks from St. Francis aren’t experts in early-stage investing. They’re educators.
But they saw how obsessed their students were with this “disappearing photo” app.
That was a brilliant insight — and as you’ve learned today, it can be a winning investment strategy.
So as you look for start-up investment opportunities, ask yourself if kids and teenagers would use the start-up’s product.
Better yet, ask your kids or grandkids if they think it’s cool.
Ask your nieces and nephews, too.
Keep an eye out for new products or apps that they’re obsessed with…
If a young company can figure out how to appeal to a younger audience, then profits might be waiting for you just around the corner.
Happy investing.
Best Regards,
Founder
Crowdability.com
