Coinbase, one of the world’s leading trading platforms for digital currencies, went public yesterday… and its early investors are thrilled.
You see, even though its stock (COIN) traded down a bit, Coinbase’s earliest investors — those who got in when it was still a tiny private startup — are sitting on a massive windfall.
In fact, some are sitting on estimated gains of more than 30,000x their money.
That’s enough to turn a $500 investment into $15 million.
Clearly, as long as you pick the right startup to invest in, IPOs can be life changing.
The thing is, there’s also another way to earn big startup profits. And with this way, the profits come in far more frequently — and they also come in fast!
Let me explain…
Invest, Exit, Profit
Startup investors earn their profits in two main ways:
- The startup goes public, like Coinbase; or
- The startup gets acquired.
As you just learned, IPOs can lead to massive profits. But when you actually look at the data, you’ll see that IPOs happen very infrequently.
The most common way for startup investors to earn their profits is through an acquisition — in other words, when a startup they invested in gets taken over by another company.
For example, in 2020, there were about 480 IPOs — which is pretty good considering everything that happened last year.
However, in the same time frame, there were an estimated 12,000 takeovers!
Big Gains, Fast
And here’s the thing:
Even if a startup does go public, that can take years and years to come to fruition.
But takeovers, on the other hand, can happen fast.
For example, Instagram, the popular photo sharing app, launched in 2010. And just two years later, Facebook swooped in and acquired it for $1 billion.
It’s estimated that early investors made 3,120 times their money in just 24 months.
As another example, a couple of years ago, we showed our readers how to claim a stake in Cruise Automation, a startup that builds software for self-driving cars.
Just six months after we wrote about it, Cruise was acquired by General Motors for $1 billion.
Readers who took advantage of this opportunity made a quick profit of 1,000%... all in just 6 months!
How to Spot Takeover Targets
These are potentially life-changing returns in a very short period of time.
And as you just learned, takeovers happen much more frequently than IPOs.
But this leads us to the key question:
How do we spot potential takeover targets early — so we can cash out for big gains if and when they get bought out?
Well, keep an eye on your inbox. Because that’s what Matt’s going to cover in his article next week.
So stay tuned!