Pre-IPO Profits

My Startup Investing Strategy Today

My Startup Investing Strategy Today
By Adam Sharp
Date March 3, 2020

I have a strong feeling that the next few years will be a difficult time for the financial markets. If you haven’t read my Early Investing piece from last Friday yet, you can do so here. It explains what I see taking place over the coming years.

Despite my negative outlook on the overall economy, I haven’t stopped investing in promising startups. I’ve invested in around 12 over the last year and plan to continue that pace.

Startups are the future. And when things get crazy, the best of them will thrive. Nimble startups will have opportunities to take over large industries as legacy companies struggle under the weight of massive debt.

The types of startups I’ve been investing in haven’t changed much over the past few years. I’ve frequently written about my love for lean and bootstrapped startups. Investing in cash-efficient companies is more important than ever in this environment.

I continue to prefer earlier-stage deals – where companies are valued at less than $50 million (and often less than $12 million). Early-stage valuations don’t change too much over time. And you’re always getting a pretty solid deal if you pick the right companies.

If you prefer later-stage (pre-IPO) investments, I continue to recommend sticking with companies that are on the earlier end of the spectrum. I would avoid the massive $5 billion-plus startups that have avoided going public. I suspect there’s a good reason most of these companies haven’t gone public yet, and it involves not being able to handle the pressure.

I would stick to the less mature pre-IPO companies, the ones valued from $300 million to $1.5 billion.

I also recommend diversifying your overall investment portfolio for the coming period. I like gold, silver and some bitcoin. Gold and silver miners could prove to be amazing investments as well – especially if central banks around the world react to down markets as I fully expect them to (with a lot of money printing). The recent sell-off in precious metals provides an excellent entry point.

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