When a company forms, it doesn’t immediately “go public” and list its shares on an exchange such as the Nasdaq.
It stays in private hands.
This can last years. But until recently, the only folks who could buy shares at this ground level were well-connected millionaires and billionaires.
Then, when these firms went public through an IPO (initial public offering), these insiders could offload their shares on mom-and-pop investors… at much higher prices.
Mom and pop often made money by buying after the IPO. A hot stock could rack up double-digit… even triple-digit… gains on IPO day.
But while mom and pop were celebrating these wins with a nice meal out… or a cruise… investors who bought before IPO day were buying a new superyacht with their gains.
His firm, Benchmark, invests in private shares. And when Uber (UBER) went public in 2019, the firm made 64,200% gains.
That’s enough to turn every $1,000 into $643,000.
Peter Thiel is another well-known Silicon Valley VC. He made 200,000% the day Facebook (FB) went public with shares he bought in the private market.
That’s enough to turn every $1,000 into $2 million.
But these wealthy insiders can no longer keep these astronomical gains to themselves.
As I (Chris Lowe) will show you today, regular investors now have more options than ever to get in on lucrative early-stage deals like these.
CF refers to “crowdfunding.” That’s when projects raise small amounts of cash from a large number of people.
It’s the opposite of the traditional VC model, where a small number of people contribute large amounts of cash.
Unlike other routes into pre-IPO shares, to buy into Reg CF deals, you don’t need to be an “accredited investor.” These are folks who’ve made at least $200,000 a year for the past two years… or have $1 million in liquid net worth.
That makes Reg CF an avenue for regular folks to invest in private companies… and beat VCs at their own game.
That’s not enough for most early-stage companies to last even a year.
But on March 15, the Securities and Exchange Commission (SEC) raised the cap on Reg CF offerings to $5 million.
And our tech-investing expert, Jeff Brown, says the law change makes Reg CF deals worth pursuing for the first time.
As he’s been showing readers of his daily tech-investing e-letter, The Bleeding Edge, the first Reg CF deal following the change just confirmed this…
An early-stage online retail company called Gumroad just completed the first $5 million Reg CF offering. It raised the entire $5 million in just 24 hours.
This shows regular investors are champing at the bit to get access to private deals. You can be sure other private companies took notice.
He has a unique perspective on the pre-IPO market…
He’s been investing his own money in early-stage tech deals for more than 20 years.
He’s even advised a handful of early-stage tech firms.
Jeff now heads up our tech-investing advisories at Legacy Research… including The Near Future Report and Exponential Tech Investor.
And early-stage tech investing is one of the core profit themes he’s been tracking for his readers. That makes him the perfect expert to turn to for insight into the implications of the law change.
He says we’re at the start of a multiyear trend in these “crowdfunding IPOs.” That’s because Reg CF is a win-win for investors and the entrepreneurs who are raising the capital. Jeff again…
Gumroad paired this $5 million raise with a $1 million private offering to strategic individual investors. There was no need for any money from VC firms.
VCs are notorious for imposing one-sided terms on the companies they invest in. So I suspect many early-stage firms will look to Reg CF deals to bypass the VCs – at least in their early funding rounds.
Expect to see an explosion of Reg CF offerings in the coming months. This is the start of a major transformation in how early-stage capital forms.
As I’ve been showing you in these pages, there’s never been a better time to be an individual investor.
Individual investors – not Wall Street banks – first got into crypto. And they’ve taken the lion’s share of the profits.
Early subscribers of our crypto expert, Teeka Tiwari, have had the chance to make 15,553% on bitcoin (BTC) since he recommended it in 2016. And they’ve had the chance to take profits on gains as high as 38,054%.
It’s now also possible to invest in shares of bitcoin miners. These are companies providing the computing power necessary to secure the bitcoin network in return for newly issued bitcoins.
One bitcoin mining stock colleague Nick Giambruno recommended at our Crisis Investing advisory in December 2020 shot up 2,123% in just 52 trading days.
And as Jeff has been pounding the table on recently, there are blank check corporations (aka SPACs).
These are another route regular investors can take to get in on the ground floor of fast-growing companies… just like VCs have been doing for years.
With expanded Reg CF deals, the playing field is tilting even more in favor of the “little guy” and away from wealthy Wall Street and Silicon Valley insiders.
Many won’t be.
Figuring out which companies to back… and which to avoid… is the difference between achieving financial freedom and losing your shirt.
There’s too much to get into now. But tomorrow, I’ll share with you Jeff’s three golden rules for being a pre-IPO investor…
So stay tuned for that at 5 p.m. ET.
Regards,
Chris Lowe
March 31, 2021
Barcelona, Spain