How to Invest in Private Companies

Does the stock market scare you these days? Downtrodden about the pitiful returns that bonds and the banks are giving you? Private companies are where it’s at.

Even though they can’t be bought using your trading programs, learning about the channels through which you can invest in them will help you make the kind of money that you deserve.

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1) Work with firms that already invest in private companies

If you have limited investing experience, don’t try to figure out privately-held companies on your own. There is much less information in the public domain concerning private companies then there is for publically-traded firms, making it difficult to assess a firm’s true worth.

In situations such as this, it’s best to leave the heavy lifting to the experts. Firms like Generational Equity (who have created an app called Dealforce that makes the process easy) deal with the acquisition and sale of private businesses every day.

This makes it preferable to work with companies like this, despite the fees they will charge in exchange for their services, as they are well worth the cost.

2) Establish yourself as an angel investor

While you may not have direct investing access to a company if they aren’t public, there are ways to park your money in private firms that are booming.

These businesses lack the ability to raise capital via the stock market, so they need to raise money for growth by seeking out venture capital funds.

You can help satisfy this need for cash by introducing yourself as an angel investor. By bringing a considerable sum of money into their business, you can buy a stake in its future success.

Before doing this, you’ll need to have an investment bankroll, so be sure to set aside a set amount of money that don’t devastate you should things go sour.

Furthermore, be sure to do in-depth research before deciding upon a company to invest in. Go with firms in niches in which you are well-schooled, and ask detailed questions that will define the health of the business, and the viability of their business model.

After you have satisfied all these requirements, only then should you swoop in with your investment to help a company fuel their growth plans.

3) Go through online investing services

If you do not have the massive amounts of capital required to be an angel investor, you might think that you are out of the running when it comes to investing in private companies.

Thankfully, it was only a matter of time before the internet would disrupt this entrenched system, as a number of online investing firms have sought to open up angel investing to the masses.

These days, most money savvy individuals are aware that startups are one of the best vehicles to make money. Savings accounts pay almost nothing, and the stock market has become unpredictable.

As a result, online firms have made it possible to park your money in funds that go on to invest in private companies. While this sounds great, the potential return is less than the other options mentioned earlier in this article, as the fees charged will eat away at your ultimate return.

However, compared to the banks and gambling in the stock market, this way of making money may be more lucrative in the long run.