| Key elements to understand about venture investing | | | | financial advisors and perhaps even other venture |
| are: | | | | investors. A good rule of thumb is much like the |
| · Private Placement venture investing can | | | | recommendation once given concerning buying a |
| kick-start your retirement fund like no other tool on the | | | | yacht, "If you have to ask what it costs to run it, you |
| planet. | | | | don't need one." These are high risk to get the high |
| · Private Placement venture investing can trap | | | | return; no risk means no high return. |
| your money for 3-10 years before you get out those | | | | · So invest only what you can afford to lose. |
| returns of 5, 10, 40, or 200 times your original | | | | · Good rules of thumb I have heard include |
| investment. | | | | investing only 10-25% of your assets in these types of |
| · Or, over that same 3-10 years, just as has | | | | investments and use portfolio strategies. |
| happened to certain mutual funds, you can watch its | | | | What kind of returns can you expect? First figure that |
| value go to zero with no way to get out. | | | | only 1 in 10 will be a winner. Of the remaining 9 maybe |
| The best way to make the really big money in venture | | | | 2 will be OK, and the rest total losers. The greatest |
| investing is portfolio investing, just like the venture and | | | | returns are in the early seed stages where the |
| investment banks do. Pick one and it is gambling, invest | | | | business is more of a napkin idea. This is the highest |
| in 10 or 30 and you have a portfolio strategy that can | | | | risk stage for any company. For example at this stage |
| net 30% to 300% or more per year, year after year | | | | the stock may be only $0.10. If at the liquidity event of |
| after year. | | | | an IPO, an acquisition or a buyout, the price can be, |
| A very large percentage of investors have their funds | | | | say, $15.00 in year 5. That is 150 times your original |
| in "safe" stocks, bonds and mutual funds. | | | | investment. If you invested $25,000, the return is |
| · Here is a recent headline, "Wachovia has lost | | | | $3,750,000. Not bad for money you could have |
| 52% of its value in the last year." | | | | afforded to lose anyway. |
| · Or another quote, "I watched my $1 million | | | | What was once the domain of the few wealthy is |
| retirement fund go to zero as Air Canada went | | | | now open to many others. This is the reason there are |
| bankrupt." | | | | so many angel investors and angel investor clubs. |
| If you want safety there is no better way than FDIC | | | | While I am no expert, I can follow the path of the |
| insured savings accounts, certain CDs and US | | | | experts and learn from them. The biggest kick your |
| Government Treasuries. In recent times, on a good | | | | retirement plan or your investment pool can get is from |
| day these offered rates of 2-6%. Unfortunately much | | | | a wide portfolio of private placement investments. |
| of this can be well below the rate of inflation. So that | | | | I know of some who have 75% of their funds across |
| "super safe" deposit can actually be losing value every | | | | a large portfolio of companies. These are individuals of |
| day! | | | | high net worth and who enjoy the world of venture |
| A good way to try private placement venture | | | | investing. You can pace yourself to be either highly |
| investing is to invest in fully compliant offerings that are | | | | involved or fully passive, your choice. The key is to |
| retirement fund compatible. If your funds are in an | | | | invest in a portfolio across many different industries |
| existing 401K or similar program you can roll all (or part | | | | and build a catalog of companies at various stages. |
| depending on the plan) into a self directed IRA and | | | | That way it is possible for you have one or two |
| then use those funds to buy these compliant private | | | | winners hit each year. |
| offering stocks. This can limit your tax exposure and is | | | | Private placement venture investors range in age from |
| just one of many different ways, but one key is to | | | | the 20's to over 100 years in age. I know a few |
| look for fully complaint offerings. This indicates that the | | | | founders who are in their teens. The only limit is your |
| management team of the start-up venture is | | | | ability to invest funds you can lose. That is the key. |
| professionally organized and using professional advice. | | | | While in the investment you will not be able to get your |
| How much should you invest? That depends on many | | | | funds out until the liquidity event. |
| factors but a simple key is to recognize that all private | | | | These are definitely high risk else you could not get |
| placements are high risk and you can lose some or all | | | | these high returns. But high risk compared to what? |
| of your money. For expert advice seek out qualified | | | | Wachovia, Air Canada or many others I could list? |