Why it's Time to "BUY, BUY, BUY"!

By Wayne Mulligan, on Thursday, April 23, 2020

Even though this is one of the worst meltdowns since The Great Depression…

And even though everything from jobless claims to stock market forecasts look terrible…

Matt and I are getting ready to go on a massive buying spree!

But as I’ll explain today, this has nothing to do with stocks…

When Stocks Go Down, Our Profits Go Up…

The public stock market has crashed by as much as 40% recently...

And many investors are anxious and depressed about their losses.

But a different group of investors are likely popping bottles of champagne right now…

These people invest in private companies — more specifically, early-stage startups.

These investors know that, when the public market heads down, their private market profits are likely to go up. Let me explain…

The Most Important Number

When you invest in a private startup, you need to analyze many aspects of the deal…

For example, you need to assess the company’s founders and management team, its technology, and its potential for growth.

But one important number can spell the difference between making a losing investment… and a massively profitable one.

That number is the company’s “valuation.”

Why Down Markets Create Big Profits

The valuation of a startup is the same thing as the market cap of a public company…

It’s the total value of the company at a particular point in time.

So when you invest in a startup, you “buy in” at its current valuation.

Not surprisingly, during bear markets, startup valuations go down.

For example, during the 2008 crash, PitchBook (a private-market research company owned by Morningstar) estimates that startup valuations went down by as much as 60%.

The thing is, just like with any investment, the less you pay going in, the greater your profits when you sell.

And that’s why startup investors love bear markets!

Let me explain more with an example…

The Secret to Earning BIG Returns

Currently, the average valuation for an early-stage startup is roughly $6 million.

But given what’s happening today, let’s imagine you could invest in a high-potential startup at a 60% discount. That would be a valuation of $2.4 million.

And let’s say, a year from now, a larger company swoops in and acquires that startup.

Statistically speaking, most startups get acquired for less than $50 million. To keep the math simple, let’s assume this startup gets bought for $24 million.

If you’d bought in at a $6 million valuation, you’d have earned 4x your money.

But if you’d bought in at the “bear-market discount” valuation of $2.4 million, you’d have made 10x your money — that’s a 1,000% return.

That’s enough to turn $5,000 into $50,000…

And it’s all because you decided to invest while everyone else was heading for the hills.

More Private Market Profit Secrets

Getting in at a lower valuation is a great reason to start investing in startups right now.

But it’s not the only reason Matt and I are planning to go on a buying spree…

As it turns out, there are a number of great reasons.

And in the coming weeks, not only will we share more of them with you…

But we’ll share tips and tricks for finding the startups with the most profit potential.

So stay tuned!

Best Regards,
Wayne Mulligan
Wayne Mulligan


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Tags: Profits Private Markets

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