Wayne recently shared a great real-world story…
It was about private investors trouncing public investors on the same investment:
Investors who bought shares of ReWalk Robotics (NASDAQ: RWLK) at the IPO made 116%. But investors who got in before the IPO made 381%.
In another story that might sound familiar, public investors in Facebook lost money on IPO day, while private investors made out like rock stars…
In fact, Bono, U2’s singer, made a whopping $43 million from his pre-IPO shares.
Given stories like these, some private investors specialize in pre-IPO investing.
Unfortunately for you, getting access to these deals is very challenging:
They have sky-high valuations, and sky-high demand, so only the most prominent venture capitalists and celebrities can access them.
SharesPost 100 Fund
The SharesPost 100 Fund is a publicly-traded portfolio of pre-IPO companies.
The fund invests in fast-growing private companies in high-growth sectors like software and healthcare.
Rather than focusing on early-stage companies (like the ones we typically look at on Crowdability), they focus on later-stage companies that are on track to IPO.
SharesPost isn't looking for home run returns like early-stage investors do. They’re looking for doubles and triples, with less risk.
Let’s look at some specific companies that are in the fund – then we’ll review some of the risks and potential rewards of an investment.
Three Companies Currently In The Fund
The Fund currently has 13 investments.
Let’s take a quick look at three of them.
1. One Kings Lane
This e-commerce site offers brand-name furniture at prices that are up to 70% off retail. They have 10 million members, up from 6 million in 2012. Founded in 2009, they’ve raised $113 million from such investors as Kleiner Perkins and Tiger Global.
The investment thesis here is that U.S. e-commerce is growing at double digits, reaching $305 billion in 2014, and home décor is one of the key areas where consumers spend big money.
Jumio makes online payments safer and easier. Their patent-pending “computer vision” technology is used to validate online and mobile credit card payments. Current customers include Airbnb, Travelocity, and Citigroup.
The investment thesis is that more people are transacting online or on their mobile devices, and there needs to be a way to reduce fraud. Founded in 2010, Jumio has raised $32 million from investors including Citi Ventures and Andreessen Horowitz.
A leader in “wearable technology” and digital fitness devices, Jawbone is the creator of JAMBOX wireless speakers, UP wristbands, and Bluetooth headsets.
With hundreds of patents in hand, Jawbone is going after the wireless audio market ($14 billion by 2018) and digital fitness devices (currently a $330 million market, expected to double this year). Founded in 1999, Jawbone has raised $310 million from investors including Sequoia and Khosla.
Risk and Reward
SharesPost continues to invest in other portfolio companies, too.
They’re leveraging their reputation and relationships to try and buy hard-to-get shares in 100 of the most promising pre-IPO companies such as Airbnb, Uber, and LendingClub.
As owners of pre-IPO shares, if their portfolio companies go public, SharesPost will be well positioned to trounce the returns of their public-market brethren.
Joining them as an investor in the SharesPost 100 is an exciting proposition: a shot at significant gains, lower risk than early-stage start-ups, diversification, professional management, etc.
But there are risks, too.
A fast-growing start-up – even if it IPOs – doesn’t always turn out to be a good investment. Zynga and Groupon, for example, IPO’d, but the price of their stock tumbled before some investors could sell their shares.
Other potential risks include liquidity. This is a publicly-traded investment, but it’s an “interval” fund, so there are no guarantees there will be ample liquidity.
The Fine Print
Given the risks, an investment in this fund should be considered a speculative investment – and it should be just one small piece of your portfolio.
But if you’re trying to profit from an IPO…
Would you rather do it at the IPO, like your public market brethren…
Or before it, like a professional?
Here are a few details:
- Minimum Investment: $2,500
- Repurchase offers for liquidity take place quarterly
- Advisory fee of 1.90%, and an upfront fee between 0% and 5.75%
- Ticker Symbol: PRIVX
To read more, click here >>
(Please note: Crowdability has no financial relationship with SharesPost, or with any of the companies in its portfolio. We’re an independent provider of education, information and research on start-ups and alternative investments.)