Last Wednesday was a big day for investors…
It was IPO day for Casper, the billion-dollar e-commerce startup.
This was one of the most anticipated financial events of the year. It was expected to make many investors wildly rich.
Today, I’ll tell you what happened, and explain why CNN called it a “disaster” for IPO investors.
Then I’ll reveal how a different group of investors turned it into a smashing success.
The mattress industry is huge. It’s worth about $13 billion.
But until recently, it was stuck in the past. Prices were high, salesmen were aggressive, and customers were frustrated.
Enter Casper, an online mattress retailer. Casper sells memory-foam mattresses directly to customers for about $500 to $950. Its products are delivered without fees, and buyers enjoy a 100-day trial period and a 10-year warranty.
Its business caught on like wildfire. Soon, orders and revenue were pouring in — and so were investors who wanted a piece of it.
Eventually, Casper raised more than $300 million from professional investors, as well as from celebs like Leonardo DiCaprio. And with all that funding, Casper’s valuation swelled. By last year, the company’s value had reached $1.1 billion.
But then it all fell apart…
Casper’s Public Debut — A “Disaster”
Last Wednesday, Casper (NYSE: CSPR) went public at $12 per share.
And as I mentioned earlier, CNN called it a “disaster.” That’s no exaggeration. Today, its shares trade for about $9, giving the company a market cap of about $400 million.
That means investors who got in at the IPO have lost about 25% of their money…
And investors like DiCaprio have lost about 66% of their money.
But meanwhile, a different group of investors are sitting on a profit of about 4,000%...
What’s going on here?
Rubber, Meet Road
Casper seemed to have cracked the code on disrupting a big industry.
That’s why investors got excited and drove up its value to wild heights. (It’s the same thing that happened with high-flying newcomers like WeWork and Uber, and before that, with companies like Groupon, Blue Apron, and many others.)
But during Casper’s IPO, the rubber met the road: it might be a great company — but even still, it wasn’t worth anywhere close to $1 billion.
That’s why, for IPO investors, Casper’s “big day” turned into a “big disaster.”
But meanwhile, a different group of investors was celebrating…
These Investors Didn’t Lose a Dime… Instead, They Made a Fortune
Even though Casper’s value plummeted from $1.1 billion to $400 million, not everyone lost money.
You see, just when Casper was getting started in 2014, the company raised $1.85 million from some early-stage angel investors.
And because it was just a tiny startup back then, its shares were cheap. At the time, its value was just $10 million or so.
That’s why, even with Casper worth “just” $400 million, investors who got in early made a fortune. By investing when the company was worth $10 million, and selling at the IPO, they made profits of 3,900% — that’s 39x their money.
That’s enough to turn a small $5,000 investment into nearly $200,000.
The Early Bird Gets the Returns
And that’s the key to startup investing:
Getting in early.
That’s why, at Crowdability, we focus on showing you early-stage deals. These are the deals that have the most upside potential.
Now, to be clear, deals like this also come with certain risks…
But that’s why we provide you with tools and services to help you weed out the bad investments…
And help you focus on the deals with the most upside, and the least risk.