Everything You Should Know About Micro Venture Capital Investing

Have you heard of micro venture investing? It’s a relatively new method of investing that can be highly profitable. In recent years, venture capitalists have been searching for smaller businesses with ample opportunity and potential for long-term success. The businesses that these venture capitalists invest in have limited financial resources at their disposal.

This form of investing is characterized by making low-risk investments that range from $10,000-$50,000. While it’s possible that an investment won’t pan out, the amount of money you’ve invested shouldn’t be too large to significantly hurt your portfolio. Before you start investing in these smaller ventures, you should know what to expect and how to start.

What Is Micro Venture Capital Investing?

Micro venture capital investing is just like standard venture investing with the main goal being to place smaller investments into businesses. Most venture capital firms require minimum investments of at least $100,000. On the other hand, micro investing gives you the opportunity to invest in new businesses with much smaller amounts.

Another notable difference between micro investing and standard venture investing is that micro investing involves placing your money into businesses that are in the earliest stages of growth, which means that the business has yet to gain any amount of traction. Micro investments have become particularly popular when investing in startups. You can be there at the very beginning. If the business becomes successful, your returns could be exceedingly high.

How to Start Micro Investing

There are several methods you can use to start micro investing, the most common of which is to partner with a micro venture capital firm like Urban Capital Network.

Before investing your money, it’s important to understand that different venture capital firms have different requirements in regards to the amount of assets you need as well as the minimum investment you must make. The firm that you partner with will invest in startups during the seed and pre-seed investment stages, which means that the company has yet to reach the series A funding stage.

Even though it’s somewhat risky to get involved with a company at such an early stage, doing so allows you to obtain larger equity shares. If a startup doesn’t have enough capital to reach series A funding, your investment could help them get there. If you invest with the assistance of a micro venture capital firm, your money will be pooled in a single fund alongside the capital from other investors.

What to Look for in a Company to Micro Invest In

When you’re searching for the right company to micro invest in, your goal should be to look for a relatively new company that is still in the pre-seed and seed stages of funding. These stages of funding will be the first times that a company asks for money.

The majority of companies that raise seed funding have a valuation of around $3-$6 million. Try to find companies that you believe have great ideas but may not have all of the funds they require to get to series A funding.

What Questions Should You Ask Before Investing?

Before you invest in a young startup, there are some questions that you should ask yourself. First, find out if a good management team is in place at the company. If there is, you can be more confident about putting your capital into the company in question. Some additional questions that you should ask include:

  • Is the market opportunity ideal?
  • Do the founders have an understanding of their company’s financials?
  • Are the founders and management team determined to garner long-term success?
  • What positive moves has the business made in its short existence?
  • What risks does the company face?
  • How will your capital help the business gain a foothold on the market?

Getting Started with Micro Venture Investments

As mentioned previously, you should look for a micro venture capital firm like Urban Capital Network. We have a strong reputation and proven results with the companies that we have invested in. Unlike most micro venture firms, Urban Capital Network’s portfolios consist of companies in various stages of fund raising, from Seed to Series A, B, or even C, and that have been backed by much larger traditional venture capital firms. The variation in funding stages and the investments by much larger VCs greatly reduces the risks and increases the diversity of the investment.

You don’t want to provide your money to a firm that doesn’t know how to find startups that are in need of seed funding. Before investing your money, make sure that your assets are high enough to handle this type of investment.

While the amount of money you invest isn’t that high when compared to other venture capital investments, the company you’re investing in won’t necessarily be stable, which increases the possibility that the company will fail. The reduced investment amount should mitigate this risk somewhat.

What Should I Do Before Investing in a Company?

Before you go forward with investing in a company, there are several steps you should take. First of all, it’s highly recommended that you speak with the founder or CEO of the startup that you would like to invest in. You may gain more confidence in your investment if you share the same values and vision that the CEO has.

Make sure that you do extensive research on the company you’re investing in. When you look at the startup’s roadmap for future growth, any knowledge you have of the industry could help you determine if the roadmap is possible or if the company would be a poor investment. You should also have a clear exit strategy in place before investing any of your money.

How Much Does Micro Venture Investing Cost?

Depending on the venture capital firm, a micro investment tends to be around $10,000-$50,000. However, it’s possible for micro investments to be as high as $500,000. It’s essential that you have enough assets before making this kind of investment.

When Should I Sell My Shares?

If the company you’ve invested in is doing well and you need to sell your shares, you may be able to sell your shares to a large venture capital investor once series A, B, or C funding begins. However, most micro investors will only sell their shares when an acquisition or IPO occurs.

Final Thoughts on Micro Venture Capital Investing

Micro investing is a fantastic method for placing your money into new startups without taking on too much risk. Even though the potential for failure is high with early-stage startups, a micro investment is relatively low, which means that the remainder of your investment portfolio should be able to make up for any losses. By investing in the initial stages of a company, future success would help you bring in high returns.

How to Choose the Best Startup Investment Platform

If you’re looking to invest in exciting companies that have the potential for explosive growth, then startups present an ideal opportunity. Today’s startup environment has plenty of room for novice investors. As long as you’re willing to accept some risk, you can put your money toward funding startups.

Startup investment platforms represent one of the main reasons why startup investing has become more accessible. Even non-experts can use these systems to identify promising companies and make significant investments. The key is to find the best startup investment platform that meets your needs as an investor.

What is a startup investment platform?

A startup investment platform is an online service that curates a list of startups and helps them find investors. The best platforms receive thousands of petitions from companies looking to be listed on the service. The platforms assess each of these companies to decide which are worthy of a place on the list.

Investors can use the platforms to invest in startups of their choosing. Each platform sets a minimum initial investment, but for many sites, the threshold is only $100. That means even small-time investors can use a platform to participate in startup investing.

Benefits of startup investment platforms

There are several reasons why first-time startup investors should start out using a platform for their investments. First of all, the fact that the platforms have a thorough vetting process lowers the general risk of the investment. While there’s still no guarantee that the venture will prove successful, you can still be confident that certain levels of professionalism and competence have been met.

Platforms have the additional benefit of bringing a high number of startups together in the same place. If you’re not an insider in the startup world, you need some way to learn about investment opportunities. A startup platform makes it easy to identify, assess, and compare potential investments. Once you’ve chosen a company to invest in, you’ll also be able to use the platform to carry out transactions. All of this would be much more difficult without the institutional support that a platform provides.

How to choose the best startup investment platform

To maximize your chances of success in startup investing, you need to pick the startup investment platform that best meets your needs. The choice of platform is the initial decision that will lay the foundation for your experience as an investor. If you make the right choice, you’ll have an easier time comparing companies, analyzing potential growth, and opting for wise investments.

There are a couple of things to consider when looking for the best startup investment platform. First of all, you need to choose a service that’s appropriate for your current level of financial security. Second, you should find a platform with a website interface that you’re comfortable with. If both these conditions are met, you’ll be able to make the most of your time as a startup investor.

Financial stability

Investing in startups can be amazingly lucrative, but it’s also somewhat risky. Compared to safer investments like bonds and stocks, startups are relatively likely to fail. Once you’ve committed your money to a venture, there’s no guarantee that you’ll ever get it back.

With this inherent risk in mind, you shouldn’t invest more in startups than your finances can handle. Take a long, hard look at your financial security, and determine how much money you can safely afford to invest. Then, look for a startup investment platform with a minimum investment threshold that falls within your budget. Signing up for a platform that demands excessively large investments could seriously derail your financial security.

Website interface

A startup investment platform is only useful if you feel comfortable navigating the website. An unwieldy interface can make it difficult to analyze companies and make investments. A slick, user-friendly site is essential to carrying out the research necessary for making smart decisions. You don’t want something as seemingly minor as a misleading format to derail your ambitions as an investor.

Before signing up for a particular platform, take some time to experiment with the website. Click through the pages and decide whether you’d be able to navigate the site easily when money is on the line. You can also search the internet for reviews, looking for opinions on a platform’s user experience. Once you’ve gotten a feel for a few different sites, you can decide which one seems like the best fit.

Popular Startup Investment Platforms

AngelList

AngelList is a platform for startup companies to raise capital from angel investors. Investors can find and make offers on startups, and then the company decides if the investor provides a good fit for the company in return for an equity stake in the company.

AngelList is a platform that’s similar to other equity crowdfunding sites like Kickstarter or Indiegogo, but instead of funding projects with donations or pre-purchasing items, investors are trading securities in startups. AngelList also has its own form of investment that helps provide companies with early stage funding.

The advantage of this crowdfunding site is that it advertises itself as being more selective than Kickstarter and Indiegogo, which means that it only lists higher quality companies.

SeedInvest

SeedInvest is a crowdfunding platform where entrepreneurs raise money from investors in exchange for equity in their company. The site was founded in 2013 and has already funded over $1 billion worth of startups since then.

Their platform allows investors to browse through different investment opportunities from around the world. It has a user friendly interface and allows users to filter by sector, country, stage of development, type of business, and more.

SeedInvest offers two ways to invest in startups. The first is through its Seed Fund, which invests in early stage companies (seed funding). The second is through its Venture Fund, which invests in later stage companies (series A funding). Both funds offer different levels of risk, so it’s important to understand what each fund does before deciding which one is right for you.

Making Your First Investment

After signing up for a startup investment platform, your next step will be to make your first investment. At this stage, patience is vital. Rushing at the first opportunity you encounter can lead to disastrous outcomes.

While any startup investment is risky, you can increase your chances of success by doing proper research. Take some time to learn about the different types of startup investing available. Then, investigate some of the companies on the platform until you find one that seems promising. While startup investing isn’t an exact science, it always pays to be diligent.

Importance of diversifying your startup investments

Whatever you do, don’t invest your entire budget in a single company. Even the most promising startups are always liable to fail. Diversification is an essential tactic in every type of investing, and startup investing is no exception.

Investing in different companies is important, but you should go even farther by investing in companies that belong to different industries. That way, a sudden downturn in a particular sector of the economy won’t sink your entire portfolio.

Finding the Best Startup Investment Platforms

Startup investing is a great way to make money quickly. It’s certainly risky, but the increased risk brings greater potential rewards. By choosing the startup investment platform that’s right for your circumstances, you can set yourself for a successful run as a startup investor.

6 Ways to Reduce Taxes on Investments

Everyone has to pay investment tax. However, certain strategies allow investors to significantly reduce their tax burden. It’s perfectly legal to do so and requires a basic understanding of tax structure.

Before discussing such methods, Let’s discuss the primary type of tax you’re liable to pay. Here is an overview:

  • Capital Gain Tax: Profit from a sale of an asset is taxable. Assets may include properties, financial assets, and stocks.
  • Dividends: Any kind of profit from stock dividends is taxable. It is taxable even if you reinvest the dividend to buy additional stocks.
  • Withdrawal From 401(K): The amount that you withdraw from 401(K) is taxable in most instances.
  • Tax on Mutual Funds: Income from mutual funds is taxable. Unlike stocks where you pay tax only when you sell a stock, you need to pay tax on the profits and dividends received from mutual funds.

Now that you have some idea of the most basic types of investment tax, here are six ways to reduce taxes on investments:

Sell Your Investment Before the End of the Year

If you’ve invested in stocks, you can get tax benefits by selling stocks that have lost value since the initial purchase. Selling losing stocks before the end of the year means that you don’t have to pay any tax on the potential income you lost.

The resulting amount can be used to offset any taxable capital gain and regular income. In financial terms, this is known as tax-loss harvesting.

While it’s true that you will need to incur a loss by selling losing stocks, you can always buy it afresh if the price is expected to rise in the future. Just make sure to consult with a professional accountant to review any restrictions on the purchase of the same stock within 30 days of selling it.

Use Tax-advantaged Retirement Accounts

You can reduce tax by investing in tax-advantaged retirement accounts. It is wiser to contribute to both the 401(K), tax-deferred accounts, and ROTH IRA, tax-free accounts.

For instance, 401(k)s, 403(b)s, and traditional IRAs are tax-deferred plans, which allow you to defer tax until a certain time in the future. Any contribution to such retirement plans is not taxed unless withdrawn after retirement. The main benefit of such plans is the active contribution from the employer.

Similarly, you can save by contributing to tax-free plans such as Roth IRAs and Roth 401(k)s. After 59 years, you will not be charged any tax on the withdrawals if the account is at least five years old.

Besides these, consider investing in 529 education savings plans and Health Savings Accounts (HSAs, which are also tax-free.)

Diversify Your Portfolio

Diversify your portfolio with tax-efficient investments. For instance, you can get potential tax-free income by investing in exotic instruments such as municipal bonds. While you may have to pay the tax at the state or local level, the federal government doesn’t charge a tax on such investments.

Selecting a tax-managed mutual fund is also a good idea to reduce taxes on investments. Fund managers operating such investments mainly focus on giving maximum tax relief to their clients. This is also true for specific ETFs that are designed to take advantage of the existing tax structure.

Another way to create tax-free assets is by investing in a qualified opportunity fund. You will get massive tax relief by investing in economically disadvantaged areas. The type of investment is particularly beneficial if you’re recognizing substantial capital gains because holding the fund for the long term can help get tax-free profits.

Spread Out Your Losses

Try to spread out your losses by taking advantage of numerous tax provisions offered by the government.

You can get maximum tax breaks by selling your primary residence if you owned the home for at least two years before selling it. If you’re married, filing jointly can give you the chance to exclude up to $500,000 from the home sale. This is a big boost for someone looking to find ways to get out of the debt or reduce the financial burden.

You can also reduce loss by taking advantage of the capital loss in investment. The law allows you to use the investment loss to offset up to $3,000 of other income. Likewise, any type of business expense can also be used to get tax relief. In a nutshell, spreading your loss to different types of investments can help gain maximum tax benefit.

Invest Strategically in Different Types of Investments

There are tons of investment strategies; however, not all of them are tax-efficient. When building an investment portfolio, make sure that you’re not blindly looking at profits only. Instead, focus on long-term strategies that can provide maximum tax breaks.

Besides investing in municipal bonds, treasury bonds, ETFs, and mutual funds, consider tax incentives from real estate, life insurance, annuities, and charity. Investing strategically in different types of investments will help diversify the portfolio, achieve goals, and allow you to take maximum advantage of your investments.

Get Advice From a Professional Accountant

If you’re looking to reduce taxes on investments but you’ve never consulted a professional accountant, it’s time to do so. Accountants are licensed to provide tax advice based on investment goals. They can also work with you to streamline financial resources according to your specific objectives and risk appetite.

While it’s true that there is a lot of literature on the Internet that can help you understand the basics, but it’s not a substitute for hiring a professional accountant. Only a professional can help visualize all the nitty-gritty of tax incentives that you may be entitled to.

Due to the nature of work, professional accountants know existing tax laws. They have a knack for finding tax incentives that can help their clients. Some clients develop long-term professional relationships with their CPA, which also helps in financial planning.

Whatever your goals, just make sure to consult a professional accountant as early as possible. Taking a proactive approach can help save a significant amount on tax this year.

What is the best way to get pre-IPO investments?

Some private companies that intend to go public through an initial public offering decide to set aside some shares that investors can purchase in a pre-IPO placement. Private companies might choose to do this to raise capital, and investors that can purchase pre-IPO stock frequently receive a discount on the price at which the stock might be offered in an IPO.

Pre-IPO investments carry a significant amount of risk, but they also offer investors the potential to benefit from substantial returns on their investments before the companies go public. Investing in a pre-IPO company can also help to increase your portfolio’s diversification, but it can be difficult to find pre-IPO stocks. Here are some tips on how to get pre-IPO investments and ensure that you earn a good return on your investment.

The pre-IPO investment process

Many companies that are preparing for an initial public offering that decide to sell pre-IPO stock do so through a process called pre-IPO placement. Through pre-IPO placement, a company can privately sell large numbers of shares before their stock goes public and is listed on an exchange.

Most of the buyers are large, institutional buyers, including hedge funds, investment banks, and private equity funds. Because of the risks and the sizeable investments made during the pre-IPO placement, buyers receive a discounted price from that stated in the company’s IPO prospective.

Few individual investors participate in pre-IPO placements because of the restrictions the Securities and Exchange Commission has in place. To participate in a company’s pre-IPO placement, individual buyers must be accredited section 708 investors. These are people with a great degree of sophistication and experience in the markets who also are of substantial net worth.

Following a pre-IPO placement, there will be a lock-up period to prevent the buyers who purchased blocks of shares during the pre-IPO placement from immediately selling their shares if the market price soars upon the company’s IPO. The lock-up period is attached to the pre-IPO placement so that buyers know that they will be prevented from selling their shares in the short term.

How to find pre-IPO investments

The 2012 Jumpstart our Business Startups Act or JOBS Act made it easier for retail investors to invest in pre-IPO stock. This law allows startups with less than $1 billion in revenue to raise capital through regulation crowdfunding.

Retail investors can thus make pre-IPO investments by pooling their investments with others on crowdfunding sites. In 2015, the SEC expanded Regulation A under the JOBS Act to allow private companies to sell up to $50 million in shares to raise capital without having to register with the SEC.

There are a few ways to find potential pre-IPO investments, including the following:

  • Join Urban Capital Network to get access to pre-IPO investment opportunities
  • Ask accounting firms, investment brokers, and advisory firms if they know of any pre-IPO startups that are worth investing in.
  • Review listings in established startup directories, including Crunchbase and ProductHunt.
  • Follow news about startups that are preparing to go public.
  • Attend startup pitching competitions.
  • Look at crowdfunding sites offering pre-IPO investments, including AngelList and Republic.

What to look for in a company before investing

Once you have identified several pre-IPO startups, it is important for you to carefully review each one before you decide to invest. Companies that are preparing to go public issue private placement memorandums to potential investors. A company’s PPM will include important information about the company, the services or products it offers, its management, the company’s past performance, the company’s finances, and the risks that should be considered before deciding whether or not it is worthwhile to invest in the company.

You should carefully review a PPM before deciding to get pre-IPO investments and assess the risks and finances of the company. If you are unsure, you can ask an investment advisor to review the PPM and tell you what he or she thinks. Ideally, you want to find a startup that has the potential to grow and perform well over the long term.

How do pre-IPO investments affect your portfolio?

When you invest in a private company, your investment will carry a greater level of risk than an investment in an established blue-chip company. However, the potential rewards of a pre-IPO investment can also be significant. You will need to critically think about your ability to tolerate risk and determine whether any of the pre-IPO companies you have identified meet your portfolio’s needs for diversification.

Start small with a modest investment and thoroughly research the company before you leap. Consider your pre-IPO investment as an investment that you are making for the long term. The investment horizon for a pre-IPO company can be much longer than the investment horizon for a blue-chip stock. Make sure that your portfolio is thoroughly diversified so that you can withstand the potential risks of your pre-IPO investments.

What are the different types of pre-IPO investments?

While it is not easy for retail investors to invest in pre-IPO companies, it is still possible. There are several different types of pre-IPO investments that you can make. If you qualify as an accredited investor, you can participate in a company’s pre-IPO placement and purchase a large block of shares.

Another option is to purchase pre-IPO stock through a crowdfunding site that offers pre-IPO stock, including EquityZen, Forge, and others.

If you are unable to directly back a pre-IPO startup, you can gain indirect exposure by investing in a publicly-traded company that invests in private companies. Finally, you might also be able to invest in pre-IPO stock through a third party such as an investment bank or lending institution that specializes in pre-IPO placements.

Best ways to get pre-IPO investments

Choosing to make pre-IPO investments can be a good way to build wealth. If you carefully research pre-IPO startups and invest in the right one at the right time, a pre-IPO investment can provide the potential for exponential returns on your investment.

Like other types of investments, pre-IPO investing carries risks, but the potential benefits can be high. If your risk profile and resources allow you to withstand the risks, pre-IPO investing presents an opportunity that you should not overlook.

What to Know About Pre-IPO Investing

It’s not uncommon for a company’s share price to increase significantly in the first days after it first goes public. Therefore, participating in an initial public offering (IPO) may allow you to see a significant return on your investment.

If you are able to buy shares in a private business before it goes public (through a platform like Urban Capital Management), you may be able to obtain an even greater return on your investment.

Let’s take a closer look at what pre-IPO investing is, the pros and cons of making such an investment and what you need to do to qualify to buy shares in a private company.

What Is Pre-IPO Investing?

A pre-IPO is a fundraising round that allows companies to obtain capital in a predictable manner. This is because the firms themselves get to name the price at which shares are sold at. During a traditional IPO, market forces determine what the stock is worth after it is made available to institutional and retail traders alike.

Therefore, companies can’t be sure that they will be able to raise the capital it wants or needs simply by being listed on a major stock exchange. In most cases, shares are sold during the pre-IPO stage at a discount to what they are projected to be worth in the event that an organization chooses to go public.

What Are the Differences Between a Pre-IPO Investment and Venture Capital

Perhaps the biggest difference between venture capitalist (VC) firms and pre-IPO investors is the level of risk the two parties take. A venture capitalist is generally investing based on a gut feeling that a company will be able to scale its operations in a timely manner. A person who engages in pre-IPO investing is typically putting his or her money into an organization that has a track record of success.

It’s also worth noting that traditional VC firms like to have a greater say in the company’s direction. It’s not uncommon for venture capitalists to insist that they have a seat on a company’s board.

They may also ask for advisory shares or other opportunities to participate in future rounds at a discount as a condition of providing an initial round of funding. Typically, those who participate in a pre-IPO round have little say as to how much they pay for the shares that they purchase. Furthermore, it’s unlikely that you would obtain any direct say in how the company operates simply by investing at this stage.

The Potential Benefits of a Pre-IPO Investment

One of the key benefits of investing in a company before it goes public is that you have an opportunity to help guide its future. Although you may not be on the board, early investors often serve as informal advisors and mentors to a firm’s management team. At a minimum, you’ll have access to more information about the business, which can give you more insight into its growth potential over the next several years and decades.

Another good reason to buy a stake in a business before it goes public is that you can acquire that stake for less than its true market value. This means that you have a greater chance of making a profit even if the company’s IPO isn’t as lucrative as anticipated.

The Potential Risks of This Type of Investment

There are two primary risks that you’ll take when investing in a company that has yet to go public. First, there is generally a lock-in period after you acquire your pre-IPO shares. This means that you may be stuck holding a position that could lose value before you are allowed to liquidate it. It’s also possible that you will be unable to liquidate your position when your shares reach your target price.

The second potential risk is the possibility that the company that you have invested in will decide against going public. As a general rule, there is no requirement for companies that engage in a pre-IPO funding round to actually become an entity that is traded on a major stock exchange.

Therefore, it’s possible that your investment becomes less liquid that you thought it would be at the time of the purchase. If the company delays its IPO, you may not be able to get your desired return on investment as quickly as you wanted.

What to Think About When Investing in a Private Company

Prior to investing in a private company, it’s important to have a firm understanding of what it is trying to accomplish. It’s also usually in your best interest to invest in businesses that sell goods or services that you are passionate about. Finally, look for a firm with a management team that has a track record of success and is comprised of people who are just as passionate about the company as you are.

How Do You Invest in Private Companies Selling Pre-IPO Shares?

To take part in a pre-IPO event as a retail investor, you must meet the criteria to be considered an accredited investor. Accredited investors must have a net worth of more than $1 million, and that calculation generally excludes the value of a principal residence. You may also qualify to be an accredited investor if you and your spouse have a combined net worth of more than $1 million after adjustments are made. Otherwise, pre-IPO shares are generally acquired by hedge funds and other institutional investors.

Final Thoughts on What to Know About Pre-IPO Investing

If you are looking for a way to diversify your portfolio, pre-IPO investments may be worth looking into. Ideally, you’ll talk to a financial adviser prior to putting money into any company that has yet to go public. This person may be able to provide a more objective look at the potential risks and benefits of a given opportunity.

Why Pre-IPO investments?

Imagine having the opportunity to get in on the ground floor of Amazon or Google. Some people were able to do so, and those who held their shares for the long run profited handsomely from the risk they took.

When most people think about investing in a new company, an initial public offering, or IPO, is what they usually think of. However, there is frequently an opportunity to invest in pre-IPO stocks. You might be wondering why pre-IPO investments might be a good idea. After all, there is no proven track record for many of these companies.

Why Should You Invest in a Pre-IPO

Although they are not the only companies that will offer a pre-IPO issue of shares, tech companies that are able to find a market niche can be some of the best long-term investments. A pre-IPO issue has the possibility of providing massive returns over the long haul.

Effectively, new companies will usually seek to sell shares to raise funds that can allow them to continue operating and expand before they become profitable.

Additionally, these shares are not traded on the public exchange, which means they are unregulated. This means that they can be easier and cheaper to trade. Checking with banks or platforms like Urban Capital Network can be a great way to find companies that are looking to offer shares for funding.

Risks and Benefits of a Pre-IPO

Like any other investment, there are potential risks that come with investing in a pre-IPO. However, these investments can provide some of the biggest upside possibilities that are available in the investing world.

The main risk is losing money.

It’s possible to lose your entire investment. This is the worst thing that can happen when you invest in a pre-IPO issue of a new company’s stock. The downside is limited to your total investment.

When looking at the possible benefits of a pre-IPO investment, the upside is nearly limitless. Obviously, it will not grow to infinity because that is a mathematical impossibility, but it can grow many times over.

A $10,000 investment that buys 100 shares at $100 a share could theoretically grow into millions of dollars over time. If the company becomes profitable, it could start paying dividends. Reinvesting these dividends will buy more shares.

Additionally, many companies will institute a stock split when shares reach higher prices, and this can also increase the number of shares you hold. Dividends and splits are not likely to occur before an official IPO, but they can multiply the number of shares you can hold.

Who Is Most Likely to Benefit from a Pre-IPO?

When thinking about a pre-IPO issue, an important question to ask is who is most likely to benefit.

Anyone who invests can benefit.

However, it’s important to remember that these investments can be more risky than established companies that have a track record of growing revenue, income and dividends. Companies that are not yet on the public market are more likely to seek out funding to continue or expand operations.

The company might fail.

Therefore, those who have a bit of money stashed away are more likely to feel comfortable taking on this risk. If you can’t afford to lose the money, you might want to think twice before investing and stick with broader investments like index funds.

On the other hand, if you have a high risk tolerance, it might be worth investing in a pre-IPO even if you don’t have a healthy nest egg that you can afford to lose.

A person’s station in life can also impact whether they’re comfortable investing in a pre-IPO. If you’re single with no kids at home, you might have more disposable income available to invest. A couple with children to feed and a mortgage to pay will likely find it more difficult to come up with the money to invest.

It’s also important to keep in mind that profiting handsomely will likely require holding a pre-IPO stock for a long time before reaping the rewards. Like other stock investments, those who avoid selling are more likely to succeed and see their investment really pay off.

What Do You Need to Know Before Investing in a Pre-IPO?

Before you invest in a pre-IPO, you’ll want to look into the founders of the company. Are they reputable people with good character? If so, they will be more likely to succeed over the long haul because they will do the right thing when dealing with their customers.

You’ll also want to look at the firm’s business plan and financials. What value does the company promise to provide? You’ll want to assess whether they are attempting to meet a need that’s currently unmet in the marketplace.

Additionally, what do revenue and expense projections look like? The answer to this question can provide a good idea of whether the company will be profitable in the long run.

Why Pre-IPO Investments Make Sense

If you have some disposable income available to invest, purchasing shares in a company that’s not yet available on the public markets can be a great investment.

These companies come with risks that are similar to those that come with other stock purchases. However, they can come with an upside that is nearly limitless for those who have the fortitude to stick around for the long term. If the company is successful and makes a public offering on one of the major exchanges, few investments can pay off more.

Pre-IPO Shares: What, Why, and How to Invest in Startups?

To raise funds, many companies offer Pre-IPO shares to the general public. The term “IPO” stands for “initial public offering” and it occurs when a privately held company offers shares of itself to the public for the first time.

Pre-IPO is attractive because it allows investors to buy shares of a company at a steep discount before the stock is listed on the stock exchange. Selling the stock at a discount makes sense because it allows the management to tackle any financial uncertainty leading to the public offering and the initial days of trading.

For investors, pre-IPO shares are a golden opportunity to make huge financial gains if the price goes up. However, you should note that pre-IPO investing is sometimes offered only to high-net-worth individuals because the management wants to sell large blocks of stocks.

The agreement also comes with a short-term lock-up period. Irrespective of the price, the lock-up period prevents the buyer from selling the stock until a specified time period.

What Are the Advantages of Pre-IPO Shares?

No one can ignore the overwhelming benefits of purchasing stocks at a steep discount. It is common for companies to offer stocks at half the initial list price. The main benefit of investing in pre-IPO shares is the opportunity to get exponential returns on your investment.

Buying the stock at a bargain will also protect you against price decline. For instance, you will be safe if the pre-IPO purchase price is $10 and the stock price declines from $20 to $15 after the IPO launch. In this scenario, the safety net of $10 a share is a huge incentive because you can still sell the stock at a profit if you feel that the price will decline further in the future.

Apart from these benefits, savvy investors often buy pre-IPO shares as it gives them a chance to build long-term wealth. In fact, many individuals and startups have taken this opportunity to amass billions of dollars within a few years.

Are IPOs a good investment?

IPOs need the same due diligence required by other stocks. Just like other stocks, you should carefully evaluate the future growth prospects of the IPO. If an IPO is generating a lot of interest, it doesn’t necessarily make the IPO successful. In reality, the success of the IPO depends on a variety of factors, which requires foresight.

However, a higher expected demand generally leads to a higher first-day return. Also called IPO pops, the average first-day returns of the IPO are 18%. According to NASDAQ, recent years have seen a much larger return. During the heyday of tech stocks, the IPO pop of high-tech stocks was close to 60%.

Can you invest in Pre-IPO companies?

Traditionally, pre-IPO stocks were only accessible to venture capital firms, institutional investors, and people with deep pockets. The technology and the surge in financial securities have leveled the playing field to a great extent. While you still need a reasonable financial background, it is still possible to find reputable companies like Urban Capital Network that allow investors to get started with minimal investment requirements.

Where can I find Pre-IPO opportunities?

You can buy pre-IPO shares from specialized brokers and financial advisors. These companies acquire stocks and resell them to potential buyers or they collaborate with other companies seeking investors.

If you’re interested in buying large chunks of stocks, you can get a list of accredited buyers from the NASDAQ private market or approach a company directly. Similarly, there are companies that offer additional options for individuals who are willing to invest at least $100,000. For smaller investors, you can find well-known brokers that can give you access to American and European markets.

You can also participate indirectly by investing in an ETF or a venture capital firm, which invests in pre-IPO opportunities.

How do I buy pre-IPO shares?

One of the easiest ways to buy a pre-IPO share is to open an account with a company that can give you access to such shares. There are a variety of companies that deal with pre-IPO listings. If you’re a seasoned trader, you can also ask your broker about pre-IPO share opportunities.

Some investors subscribe to trading news to get information about companies looking for investors who can buy their shares before the company goes public. Attending investment seminars and conferences is yet another method to talk to employees who are willing to sell their shares.

Can you sell IPO shares immediately?

In most cases, you cannot sell your IPO shares immediately if you purchased them before the shares started floating on the stock exchange. This restriction is often called a lock-up period. Company insiders, such as employees and large investors, are also restricted until a certain period. The lock-up period generally spans 90 days to 180 days.

Every company has a different lock-up period. If required, you can look at the S-1 filing with the SEC, which indicates the duration of lock-up. It is important to realize that lock-up periods are not mandated by SEC. To prevent hysteria and ensure stability, the company or the investment bank underwriting the IPO request decides the duration of lock-up, if any.

Pre-IPO Share Risks

Just like any other large-scale opportunity, pre-IPO is also risky. If you’re planning to buy shares before everyone gets in the game, beware of the following caveats:

  • Lack of Liquidity: Unlike the public stock exchange, you will be hard-pressed to sell your shares to private investors if you change your mind after buying pre-IPO shares. Under these circumstances, the only way is to wait for the company to start trading.
  • Lack of IPO Approval: If the company is selling pre-IPO shares, it doesn’t mean that it will go public. Before going public, each company must get approval from SEC and the stock exchange. If the approval is denied, it may take a while to dispose of the share.
  • Inexperienced Team: A team without prior experience in dealing with IPO can face hurdles along the way. When buying pre-IPO shares, it is also necessary to evaluate the history and experience of top management in running business affairs.

Final Thoughts on Pre-IPO Shares

Buying pre-IPO shares in a company is a great idea if you can accurately predict the future potential of a company. If everything goes according to plans, there are seldom better opportunities in the market.

Purchasing the stock at a lower price also gives investors a safety net to avoid losses. Overall, it is a golden opportunity certainly worth the hype. Talk with Urban Capital Network about Pre-IPO share investing opportunities.

Early Investment Opportunities: How To Get In On The Ground Floor

You may not know this, but the average millionaire has seven different streams of income. Why? Because they know that one of them might dry up at any time. They diversify their resources and investments to protect their financial future.

One way to build your wealth is through investing in early stage companies or stocks that are likely to grow exponentially in the future. For instance, a $100 bet on Amazon during its early days could have netted you $14 million. If you invested in LinkedIn during its startup phase, you could have increased your investment by 261,900 percent.

Numbers like these are inspiring, but the sad truth is most startups fail. Therefore, being an early stage investor requires a high risk tolerance and the ability to identify the right early investment opportunities. Here are some tips to help you do exactly that and get in on the ground floor with these types of investments.

What is Early Stage Investment?

Prior to launch, a startup requires early stage investment. Also referred to as seed capital, early stage investment is the first initial stage of investment in which startups receive just enough money to provide proof of concept or become profitable.

If the business proves itself viable and can successfully get off the ground, then investors can move on to series A, B, and further funding rounds. At this point, you can begin seeking out other early investment opportunities.

Where to Find Early Stage Investments

Unless you have the inside scoop and a friend or family member with a viable startup in need of direct funding, the best way to find early stage investments is by finding angel syndicates, venture funds to invest in or being part of a group like Urban Capital Network.

Angel Syndicates

Angel groups or syndicates allow you to invest a smaller amount of about $25,000 (if they are not a crowdfunding site). However, they require a four to five-year commitment before you may begin seeing a return on your investment.

Each angel syndicate has its own membership process and format. Some require a larger investment commitment than others and offer direct funding opportunities in addition to seed stage funding.

Angel groups are available in most major cities. On the national level, the Angel Capital Association is a non-profit providing seminars, conferences, and educational resources for those seeking early investment opportunities.

Venture Funds

Venture funds typically require a greater capital investment but less of your time. These professionally managed investment funds accept limited partner investors and on average require a $250,000 minimum commitment for up to four years.

Venture funds usually charge a two percent fee to manage your money. Meanwhile, profits made from the fund’s investments are typically shared with limited partners according to an 80/20 split.

Like angel groups, venture funds are located in most major cities, but most can be found in Silicon Valley and the Pacific Northwest.

Urban Capital Network

The Urban Capital Network is a fantastic network of people and partners. Although there are many networks for all kinds of investors, UCN is trying to make it easier for more people to invest.

UCN has enhanced the public’s access to investing with their forward-thinking and easy-to-use investment process.

Through UCN people are able to get more access to early investment opportunities. The network is packed with only viable investment opportunities that are vetted for their potential. Because of this, both beginners and experienced investors can get access to various early investment opportunities.

How to Spot The Next Big Thing

In many ways, the next big thing is already here and all around you. If you think about it, not long ago, people thought Amazon and Netflix couldn’t possibly get any bigger. However, they continue to grow at impressive rates.

Other areas of interest still considered the next big thing include streaming video, e-commerce, digital payments, and software-as-a-service. Each of these has been around for a while, but their adoption rates continue to grow, proving there is plenty of room for growth and both existing and new investment ventures. In other words, they are still the next big thing.

Nonetheless, when thinking about the next big thing, it’s important to expand your vision. According to several sources, here are some innovations on the verge of becoming the next big investment opportunity:

  • Artificial intelligence
  • Virtual and augmented reality
  • Online DNA analysis
  • Autonomous driving
  • Immune system engineering
  • Large-scale desalination
  • Reusable rockets

The key is finding the right opportunity or investing in an angel group or venture fund targeting startups in these burgeoning fields.

Risks Involved with Early Stage Investments

Despite the possibility for staggering gains of up to 1,000 percent or more, investing in early stage opportunities is a risky business. The majority of new products or companies simply fail to make it, so investing in startups takes a high risk tolerance. It takes someone willing to take a risk and lose their entire investment in the hope of a big payoff.

That said, there are several different types of risk associated with early stage investing, including:

Loss of Investment

Obviously, the biggest risk of investing early in opportunities is losing all of your money. Many startups fail completely or manage to survive with little to no growth ad profits. In these cases, you will most likely lose your entire investment.

Illiquidity

Another risk is illiquidity of your investment. Even if your chosen investment opportunity does prove successful, it may take years to exit your position and see your money again.

Dilution

As an early stage investor, you also run the risk of dilution. Since startups tend to have several rounds of funding to continue raising capital, new investors may also receive a share of the equity. This means the issuing of additional shares, which dilutes the ownership percentage of current investors.

Bottom Line on Early Investment Opportunities

Getting in on the ground floor of an investment opportunity can yield tremendous gains and explode your wealth virtually overnight. However, it might take several years to get to this point, if you get there at all.

The fact is most startups fail. To succeed as an early stage investor, you need a high risk tolerance and the right opportunity.

The good news is there are plenty of opportunities out there. With the right due diligence and risk appetite, you can discover the next goldmine and reap the rewards.

Understanding Startup Financial Projections: What You Need to Know

Entrepreneurs prepare financial projections to convince investors to provide funding for startups. Investors use them to determine the potential for a new company’s profitability. Budgets, forecasts and proformas mean the same as projections, and they serve the same primary purposes.

But an investor must understand that projections are just that, projections. So investors have to take future projections with a grain of salt and as a guide when making investment decisions.

Understanding the Importance of Startup Financial Projections

Investors examine startups in the same way that doctors study x-rays. They reveal the health of an organization’s financial status without regard to outward appearances. An explanation of factors that predict a startup’s chances for success gives you a basis for evaluating the safety of your investment.

As an investor, you surely want to know the income and expenses that a startup expects to experience. Payroll or rent occur as fixed expenses, among many others. Variable expenses may include the costs of selling goods, materials and marketing, among other essential items. Startups can estimate revenue by citing the potential market for a product or service.

Learning What Financial Projections Do and How They Work

When you review a startup’s business plan, you can expect to find three projections that outline the risks you face as an investor. For example, the information contains a balance sheet, cash flow statement and income statement. When you examine financial projections, you gain insight into the potential for an entrepreneur to succeed in running a business.

The value of projections comes to you as an understanding of your potential for return on investment. They show you what the business owner thinks may happen based on facts or imagined outcomes. In addition, the information needs to provide answers to questions you may have about the reliability of your investment. For example, most investors want to know what startups plan to do with a loan or equity investment they get from you. In addition, you need to know how and when they plan to pay it back or give you a return on your investment.

Examining the Components of a Startup Financial Projection

As an investor, you can expect to receive many funding requests. A systematic review lets you examine each one on a consistently factual basis. In addition, it provides a basis for comparing competing proposals. Finally, the projects that startups prepare and submit for review give you the information to accept or deny the opportunity to fund a new company.

Projections can give you a business model concept that includes goals and objectives. As factors that affect the finances of an organization, they reflect income tax planning, investments and insurance.

Reviewing the Income Statement

An income statement for an existing startup that needs additional funding for expansion or relocation can provide a yearly or quarterly report. Some startups may decide to give up equity to investors as opposed to a loan.

As an investor, when you review the statement you can judge a company’s future performance based on the income reports. As one of the vital pieces of information in the statement, it must amount to more than the costs a company incurred. In addition, it must provide the return on investment that you deserve in exchange for equity in the company.

The expense lines show you how much the company spent to create the goods or services it sells. Businesses include the cost of sales in the first expense line, and it covers everything needed to make the product or service. Operating expenses include expenditures for obligations that do not relate to production.

Checking the Balance Sheet Figures

A balance sheet tells you the most basic information that can help you decide to provide funding or not. It gives an accurate description of the assets a business owns and how much it owes. In addition, it reveals the amount of money that other investors have provided. Finally, as a statement of financial position, the balance sheet gives you a summary of a company’s status at a specified date.

Examining the Cash Flow Statement

A cash flow statement gives you a view of how much money a company receives and how much goes out. As a result, you can use it to predict the future of a company that wants you to fund their enterprise. The information that the cash flow statement must provide includes cash that comes from a company’s operations. In addition, it reflects investing activity and money that a company receives from financing projects and activities.

Assessing Startup Financial Projections

Your position as an investor lets you assess the future value of your investment based on the current data that a borrower requests. When you examine the cash flow projections, you can see where a company expects to get the money they reflect. Sources may include loans, receivables, credit lines and others. The income statement helps you evaluate a company’s potential for growth. Finally, the balance sheet can let you review the rate of return that you may expect from your investment.

Summarizing the Process

While evaluating the risk of investing in a startup may seem complicated, the financial projections can make it seem less so. An income statement with a balance sheet, along with a cash flow statement, provides the essential information to help you make an investment decision. Of course, you may choose to review much more information, but these three pieces of information provide what you need to know.

Understanding Startup Financial Projections: What You Need to Know

Entrepreneurs prepare financial projections to convince investors to provide funding for startups. Investors use them to determine the potential for a new company’s profitability. Budgets, forecasts and proformas mean the same as projections, and they serve the same primary purposes.

But an investor must understand that projections are just that, projections. So investors have to take future projections with a grain of salt and as a guide when making investment decisions.

Understanding the Importance of Startup Financial Projections

Investors examine startups in the same way that doctors study x-rays. They reveal the health of an organization’s financial status without regard to outward appearances. An explanation of factors that predict a startup’s chances for success gives you a basis for evaluating the safety of your investment.

As an investor, you surely want to know the income and expenses that a startup expects to experience. Payroll or rent occur as fixed expenses, among many others. Variable expenses may include the costs of selling goods, materials and marketing, among other essential items. Startups can estimate revenue by citing the potential market for a product or service.

Learning What Financial Projections Do and How They Work

When you review a startup’s business plan, you can expect to find three projections that outline the risks you face as an investor. For example, the information contains a balance sheet, cash flow statement and income statement. When you examine financial projections, you gain insight into the potential for an entrepreneur to succeed in running a business.

The value of projections comes to you as an understanding of your potential for return on investment. They show you what the business owner thinks may happen based on facts or imagined outcomes. In addition, the information needs to provide answers to questions you may have about the reliability of your investment. For example, most investors want to know what startups plan to do with a loan or equity investment they get from you. In addition, you need to know how and when they plan to pay it back or give you a return on your investment.

Examining the Components of a Startup Financial Projection

As an investor, you can expect to receive many funding requests. A systematic review lets you examine each one on a consistently factual basis. In addition, it provides a basis for comparing competing proposals. Finally, the projects that startups prepare and submit for review give you the information to accept or deny the opportunity to fund a new company.

Projections can give you a business model concept that includes goals and objectives. As factors that affect the finances of an organization, they reflect income tax planning, investments and insurance.

Reviewing the Income Statement

An income statement for an existing startup that needs additional funding for expansion or relocation can provide a yearly or quarterly report. Some startups may decide to give up equity to investors as opposed to a loan.

As an investor, when you review the statement you can judge a company’s future performance based on the income reports. As one of the vital pieces of information in the statement, it must amount to more than the costs a company incurred. In addition, it must provide the return on investment that you deserve in exchange for equity in the company.

The expense lines show you how much the company spent to create the goods or services it sells. Businesses include the cost of sales in the first expense line, and it covers everything needed to make the product or service. Operating expenses include expenditures for obligations that do not relate to production.

Checking the Balance Sheet Figures

A balance sheet tells you the most basic information that can help you decide to provide funding or not. It gives an accurate description of the assets a business owns and how much it owes. In addition, it reveals the amount of money that other investors have provided. Finally, as a statement of financial position, the balance sheet gives you a summary of a company’s status at a specified date.

Examining the Cash Flow Statement

A cash flow statement gives you a view of how much money a company receives and how much goes out. As a result, you can use it to predict the future of a company that wants you to fund their enterprise. The information that the cash flow statement must provide includes cash that comes from a company’s operations. In addition, it reflects investing activity and money that a company receives from financing projects and activities.

Assessing Startup Financial Projections

Your position as an investor lets you assess the future value of your investment based on the current data that a borrower requests. When you examine the cash flow projections, you can see where a company expects to get the money they reflect. Sources may include loans, receivables, credit lines and others. The income statement helps you evaluate a company’s potential for growth. Finally, the balance sheet can let you review the rate of return that you may expect from your investment.

Summarizing the Process

While evaluating the risk of investing in a startup may seem complicated, the financial projections can make it seem less so. An income statement with a balance sheet, along with a cash flow statement, provides the essential information to help you make an investment decision. Of course, you may choose to review much more information, but these three pieces of information provide what you need to know.