How to "Cash In" on Start-ups

By Wayne Mulligan, on Thursday, September 24, 2015

Let’s say you bought some shares of Google about six months ago...

With the stock up 13%, you decide to sell.

To take your profits, you log into your brokerage account, click “sell”—and in a flash, your shares are sold on the NASDAQ.

But if you were talking about taking profits on a private start-up you’d invested in, this would be an entirely different story...

You see, in the start-up world, there’s no such thing as a stock exchange: once you invest, your money is generally locked up for years.

But as you’ll learn today, a new company is planning to change all that:

It aims to make taking profits from your start-up investments as easy as 1-2-3.


Every week, Crowdability collects new start-up deals from across the web.

One source of these deals is a funding platform called CircleUp.

Rather than being tech-focused, the deals from CircleUp are consumer-focused:

Picture “the next Ben & Jerry’s ice cream” or “the next Snapple”—those are the types of start-up companies you can invest in on CircleUp.

Consumer companies can be exciting investments:

Not so long ago, for example, Naked Juice was a tiny organic juice company based in Santa Monica, California… then it was acquired by Pepsi for $450 million.

As another example, just five years ago, Chobani was a small “start-up” that made Greek-style yogurt… now The Wall Street Journal says it’s worth $5 billion.

Unfortunately, investing in such companies can require patience...

In fact, CircleUp estimates that the typical holding period for a private investment is roughly four and a half years.

But if CircleUp gets its way, investors like you won’t have to wait nearly so long...

Taking Profits Off The Table

Before we show you what we mean, let’s review the two ways that investors typically get their money back after investing in a private company:

  1. IPO:  A once tiny start-up becomes a large enterprise, then goes public. Once it starts trading on a stock exchange like the NASDAQ, you can sell your shares.
  2. M&A:  The start-up gets acquired by a larger company. This outcome is for more common than a start-up going public.

The thing is, it can years for a start-up to go public or get acquired.

For example, Facebook was founded in 2004. It didn’t go public until 2012.  Investors had to wait nearly eight years for a return on their investment.

Wouldn’t it be great if you could cash out of your start-up shares more quickly?

We think so...

And CircleUp thinks so, too...

Secondary Shares

That’s why CircleUp just launched a new feature called “Rights Plus” (or, “Rights+”).

Rights+ is a “secondary market”—in other words, it’s a market where investors can buy and sell shares in private companies amongst themselves. Basically, it’s like a stock exchange for private investments.

So now, if you invest in a start-up on CircleUp, you’ll be able to sell your shares as soon as 12 months later.

More Liquidity = More Opportunities (To Profit)

To be clear, there’s no guarantee that you’ll have a buyer for your shares...

So you still need to be prepared to hold onto your investments for the long haul.

But that being said, we’re excited about CircleUp’s new marketplace—and we hope other funding platforms follow suit.

The easier it is for investors to sell their shares, the more demand there’ll be for start-up investments in the first place...

And if there’s more demand for start-up investments then more businesses will get started, more jobs will get created, and more breakthrough technologies will get developed.

And most importantly of all, perhaps, more profit opportunities will emerge for investors like you.

You can learn more about CircleUp’s Rights+ marketplace here »

Happy investing.

Best Regards,
Wayne Mulligan
Wayne Mulligan


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