Pre-IPO Profits

Silver Linings

Silver Linings
By Adam Sharp
Date March 31, 2020

There’s not much to like about our current situation. Most of us are stuck at home. The economy is struggling. And the decade-long bull market may well be over.

But there is a silver lining. We’re going to get a chance to buy great stocks at big discounts. And we’re going to have tremendous investment opportunities in the startup world as well.

For the last 10 years, money has been relatively easy to come by for startups. All that changed with COVID-19.

Venture capitalists are significantly cutting their investment volumes. That means startups are going to have a hard time raising money moving forward.

This presents an opportunity for online angel investors like us. I suspect we will all get a chance to invest in some truly impressive companies – at great valuations – before this is over. This applies to both late-stage and early-stage private companies.

I’m preparing for this by keeping a larger-than-normal piece of my investment portfolio in cash. That way, I can move quickly when I see great investment opportunities on platforms like AngelList and MicroVentures.

Specifically, I am looking for startups that are lean, bootstrapped or profitable. I don’t care what industry they’re in. I mostly want to invest in great companies that don’t need much, if any, outside capital.

I will also take a few chances on companies that are growing extremely quickly but will likely need to raise more capital. As long as their trajectory is sustainable, companies like this should be able to continue to raise money – even during hard times. Just remember that a good portion of the companies in this bucket are likely to fail. But that’s to be expected in the early-stage world.

The point is that we’re going to have a chance to invest in more higher-quality deals than we would during “good” times. Take advantage, if you can.

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