Historically, investing in private startups has helped investors earn astronomical returns.
For instance, Facebook’s first private investor made 200,000% when it eventually IPO’d. That’s enough to turn $1,000 into $2 million — with just one investment!
But not all private deals will be so successful. And furthermore, such investments come with a number of risks and pitfalls.
Which is why, today, I’m going to tell you the truth about investing in private companies, including all their downsides.
But even more importantly, I’ll begin to explain how to overcome these downsides…
So you can put yourself in position to earn big, fast profits!
3 Private Market Pitfalls
Yesterday, Matt explained why private startups could be considered the “perfect investment.”
After all, with just a small amount of capital, such investments can provide massive upside.
However, investing in the private markets has its own set of challenges. As Matt admitted, “there’s no such thing as a free lunch.”
So today, I’ll explain three of the biggest private market pitfalls.
Pitfall #1 — The Need to Build a Portfolio
When you invest in an early-stage private company, you’re getting in at the ground floor.
This puts you in position to pocket big upside — but it also creates investment risk.
After all, an early-stage company doesn’t generally have much revenue, its team is small, and the market for its product could still be unproven.
Some of these startups will work out, and a few will work out incredibly well — but many won’t even survive. That’s why investors need to build a portfolio of these investments.
Bottom line: investors who aren’t inclined to make the effort to build a portfolio of startup deals are taking too much risk.
Pitfall #2 — The Need for Time
Another big drawback with private investments is that the profits can take time to arrive.
Sure, Matt and I have helped our readers get into deals that delivered big returns, fast — deals like Elio Motors that handed investors 300% returns in just 30 days.
But most profits take far longer to arrive. For example, Facebook’s first investor had to wait about seven years to cash out of his investment.
So if you’re planning to retire soon, or you’re already retired, you might not have time to wait.
Pitfall #3 — Startup Investments Are Illiquid
And finally, in the private market, you can’t cash out your investments whenever you’d like.
You see, private companies don’t trade on the stock market. Generally speaking, you won’t get your money back until the startup you invested in is sold or goes public.
Startup investments are illiquid. That’s why we recommend allocating only a small amount of your overall portfolio into this asset class.
One Thing We’ll Never Do
After reading about the 3 pitfalls of private investments — what you might have been hoping was the “perfect investment” — you may be feeling discouraged.
But here’s the thing…
We’ll never present you with a problem, without also providing you with a solution!
So, next week, Matt will start telling you how to overcome all the pitfalls I just went over.
As you’ll see, he’ll show you how you could still invest in breakthrough companies — companies that have the potential to hand you 1,000%+ returns:
- Without betting on unproven, risky businesses.
- Without having to wait years for your profits to come in.
- And without locking up your cash in illiquid investments!
In other words, he’ll show you how you could potentially earn big profits — but with much less risk, and in much less time, than with traditional private investing.
So be sure to keep an eye on your inbox next Wednesday at 11:00 AM Eastern!