Kris’ note: Jeff Brown, tech expert at Brownstone Research, has invested in more than 260 private companies. Many have yielded returns in the thousands of percent.
But there’s a problem… government regulations make it almost impossible for the everyday investor to get in on private shares before they go public.
So Jeff set out on a mission to bridge that gap. And after six years of countless attempts and failures, he’s finally found a way…
If you want to learn more about one of the best investing strategies in the world… make sure you attend Jeff’s event this Wednesday, November 17, at 8 p.m. ET. He will share all the details… so you can start investing in private companies, too.
By Jeff Brown, editor, The Bleeding Edge
I am going to do something unusual today…
I’d like to make a “confession” of sorts.
For the past six-plus years, I’ve been on a journey. I rarely speak about it publicly. Even some of my colleagues didn’t know about it until recently.
For the better part of a decade, I have been trying to answer one question: How can I bring private investment opportunities to everyday investors?
This has been my driving motivation for everything I do. And the reason is simple.
As an active angel investor, I have seen firsthand the impact of investing in private companies.
As of this writing, I have invested in more than 260 private deals. Many of my returns are now measured in the thousands of percent.
And here’s what might surprise you… I didn’t do this for myself.
What motivates me to invest in private markets is my family. I have two young boys. And the investments I have made in early-stage technology and biotechnology companies have all but guaranteed that they will be comfortable and supported for their entire lives.
That is an incredible feeling. In the event that my time is too short on this Earth, this gives me great comfort. And in a world where politicians and policymakers continue to steal from future generations, I feel empowered to do something about it.
Investing for the next generation is a way to offset the egregious spending and selfishness of the current generation.
This is the type of “generational wealth” that every investor hopes to pass down to their children and grandchildren.
I wanted to find a way to bring that to my readers.
So, more than six years ago, I set out to find a way to make it happen. And along the way, I opened several “doors” to bring me closer to my goal…
Door #1: Pre-IPO Shares
In June 2016, I first attempted to bring private investments to my subscribers. The strategy was simple.
I told my readers to contact their brokers and try to get an allocation of pre-IPO shares in a company on the verge of a public offering. Because private companies have to file publicly with the Securities and Exchange Commission (SEC) in advance, it is possible to know and prepare for upcoming IPOs.
My first attempt was a company we may know – Twilio (TWLO). Twilio enables software applications and websites to send messages directly to consumers.
For example, Uber uses Twilio’s technology every time it sends customers a message. It is the same technology that enables us to send a quick message to a driver on their way to pick us up.
This is something that would be impossible for most companies to handle themselves. It’s just too complex. That’s why Twilio is such a great company.
And I knew it would rocket out of the gate. Anybody who could get a pre-IPO allotment would make a killing.
The pre-IPO shares were priced at $16. Today, Twilio trades for around $300, a 1,775% return on the investment.
After that recommendation, I did have several readers write in to tell me they’d established a position. But the vast majority weren’t able to get in.
The problem? There is never just one broker with access to every IPO. Access depends on the underwriters (the people who determine your level of risk) and how much demand there is for each deal.
Naturally, deals that are in high demand go on allocation. That means the limited number of pre-IPO shares go to the investors with the largest brokerage accounts.
I knew that if I wanted to bring early stage investments to all of my readers, this was not a realistic option.
So, I kept searching.
Door #2: Secondary Markets
One year later – in the summer of 2017 – I tried again. This time, I took a close look at secondary markets.
Secondary markets are where private investors can sell their investments to other private investors. The deals are brokered through companies like EquityZen or Forge Global. Secondary markets are not nearly as liquid as public markets, but they are an interesting option for acquiring shares in private companies.
In July 2017, I recommended my readers invest in a blockchain technology company called Chain via a secondary market offering.
Jeff Brown’s Secondary Markets Recommendation in 2017
Chain was one of the original pioneers in blockchain technology applied to financial services. I knew it would make a great private investment.
Sure enough, Chain was acquired just over a year later for an undisclosed amount. I’m certain readers who were able to invest saw an incredible return in a short period.
But as promising as secondary markets were, they, too, were very restrictive. These opportunities were only for accredited investors. And back then, secondary shares in private companies were typically bundled up in a special purpose vehicle (SPV).
Making matters worse, these were typically restricted to just 99 investors. These restrictions were driven by SEC regulations. Once again, regular investors were locked out.
Door #2 was closed to us.
Door #3: Initial Coin Offerings
Two years later in 2018, I was still no closer to bringing private investments to my subscribers. But I didn’t give up.
That year, I began researching initial coin offerings (ICOs). ICOs are similar to IPOs. The important difference is that ICOs award investors with “tokens” in a new blockchain project rather than shares in a public company.
ICOs were an interesting option. At first glance, they appeared to be a perfect solution. ICOs promised to “democratize” early stage funding for blockchain projects and give regular investors a “seat at the table.”
In 2018, I researched ICOs extensively. I even published some limited research on the topic.
But quickly, ICOs fell victim to the heavy hand of U.S. securities regulation. The most promising blockchain projects abandoned this funding route in the U.S. due to regulatory uncertainty.
Today, initial coin offerings are nonexistent in the U.S. – they are ironically available only in international markets.
Once more, the door was closed, and I was left searching for yet another way to bring private investment opportunities to my readers.
Door #4: Venture Capital-Like Returns for Everyday Investors
In 2019, I made a breakthrough.
After closely studying the IPO markets, I discovered there is still a technology sector that goes public early, typically before a company experiences product revenues.
It reminded me of the “old days” in the late ’90s when companies like Amazon went public at valuations less than $500 million. This meant that the majority of the upside was still ahead of us. Fantastic!
As some of my readers might have guessed, that sector is early stage biotechnology, and this led me to launch Early Stage Trader, my third research service.
By getting in when promising biotech companies were still in their earliest stages, investors could profit from these stocks as they finally hit Wall Street’s radar and achieved their first milestones.
This was followed by the launch of Blank Check Speculator earlier this year. By investing in special purpose acquisition corporations, we could essentially get pre-IPO shares of high-growth, exciting companies before they hit public markets.
Investing in SPACs is a way for all investors to gain access to pre-IPO shares with almost no downside risk.
I’m proud of the work we’ve done with these products. And they will continue to give my readers easy access to early stage opportunities.
As great as these services are, I still knew I wasn’t done. I still had one final “door” to open.
The Final Door
I can’t tell readers how excited I am to open this final door. We are going to transform the industry.
After years of work, I’m pleased to share that my persistence has paid off. Due to some recent changes in SEC regulations, I’m finally able to bring investors opportunities to truly get in on “day one” of private investments.
No need to be an accredited investor.
The size of your brokerage or bank account doesn’t matter.
No limitations on the number of investors in a deal.
These private investments will finally allow me to put all my experience with investing in private companies for more than two decades to good use, on your behalf.
I’ve paid the price of admission. I’ve spent millions learning the ins and outs of early stage private investments. And now I finally have a platform to share it with you.
We are going to be empowered to make fantastic investments… and help support founders and entrepreneurs building the next generation of technology and biotechnology companies.
We’re going to be investing in the future.
It’s all led to this.
After six-plus years… thousands of hours of research… several dead ends and near misses… it is finally time. It is finally time for us to enter the exciting world of private investments.
I’ll share all the details at my Day One Summit coming up on Wednesday, November 17, at 8 p.m. ET.
There, I’ll explain the recent changes that make this possible… and how investors can get started.
This will be a night to remember. So please, if you haven’t signed up to attend yet, go right here to RSVP.
I’ll see you there.
Editor, The Bleeding Edge