Founded in 1972, Sequoia Capital is one of the oldest venture capital (VC) firms in the business.
Headquartered in Silicon Valley’s Menlo Park, its core focus is technology startups.
Sequoia funded some of today’s most well-known companies before they became famous: Apple, Google, Instagram, Oracle, PayPal, Stripe, Yahoo, and YouTube.
And several of its investments have recorded massive returns:
Google’s initial public offering (IPO) turned a $12.5 million investment into $4.3 billion. That’s more than a 344x return.
Facebook’s acquisition of WhatsApp turned a $60 million investment into $3 billion – a 50x return.
Dropbox’s IPO turned three seed rounds (initial funding stages) into an all-in average 467x return.
While these are some massive returns, and the firm has plenty more, here’s the thing…
Top VC firms like Sequoia actually miss way more often than they hit.
In fact, some have win rates of only 10%. That’s right: They strike out 90% of the time. Yet they’re still highly successful.
Today, I’ll explain why… and I’ll show you how to apply this strategy to your own portfolio.
Because in markets like today, private investments are one of the best ways to shield yourself from volatility.
Being a successful pre-IPO investor isn’t just about how many small bets you win or lose.
Instead, it’s all about the average returns of your winning and losing investments.
You see, your win rate isn’t as important as the size of your average winner versus the size of your average loser.
And that’s why VC firms look for private companies with 10x potential upside or more. If they bag just one huge winner, it more than makes up for a string of losers.
The table below explains how the math works…
|Hypothetical VC Portfolio||Investment||Return||Balance|
|Private Investment 1||$100||-100%||$0|
|Private Investment 2||$100||-100%||$0|
|Private Investment 3||$100||-100%||$0|
|Private Investment 4||$100||-50%||$50|
|Private Investment 5||$100||-50%||$50|
|Private Investment 6||$100||-50%||$50|
|Private Investment 7||$100||-25%||$75|
|Private Investment 8||$100||-25%||$75|
|Private Investment 9||$100||-25%||$75|
|Private Investment 10||$100||1,000%||$1,100|
The key to making this strategy work is finding private companies with high upside and letting them run. These home runs will more than make up for the strikeouts.
If you wait until they go public, it’s much more difficult to do. That’s why VCs focus on companies before they have an initial public offering (IPO).
Consider this… When Airbnb, Snowflake, Uber, and Facebook went public, they had already accumulated $20 billion in pre-IPO value.
So not only did pre-IPO investors watch their share prices rise substantially… IPO-day investors paid significantly more for those same shares.
Studies by research firms like Blackstone and KKR show that private companies outperform the S&P 500.
Plus, they have lower volatility than publicly traded companies, performing better during challenging times.
So VC investing is the perfect way for investors craving outsized returns to swing for the fences.
There’s just one big problem… Most people can’t invest with VC firms.
Their funds are restricted to “accredited” investors and large institutions. In other words, if you don’t have at least $1 million in net worth, you’re mostly out of luck.
On top of that, spending more upfront on IPO day… for smaller returns… limits your ability to spread your investment dollars across multiple ideas.
But thanks to regulatory changes, these firms are no longer the gatekeepers to some of the best deals on Wall Street…
Needles in a Haystack
In the past, Main Street investors couldn’t get private shares in Uber, eBay, or Google, even if they wanted to. You had to be a millionaire or insider.
But a rule change from the Securities and Exchange Commission now allows ordinary investors to invest in private companies before they go public.
They’re called Regulation A+ and Regulation CF offerings. And often, you can buy into these private deals with minimums of $50, $100, or $500.
But even with the new rules, VCs still jealously guard the best opportunities. They employ armies of analysts to hunt them down. And then, they fill up all the funding rounds so no one else can get in.
For ordinary investors, it’s like trying to find a needle in a haystack…
That’s where we come in.
Thanks to Daily editor Teeka Tiwari’s network of industry experts and insiders, he recently came upon what could be the single-biggest pre-IPO in PBRG history.
The investor behind it has built his billion-dollar fortune off 11 private deals.
His first deal took a small internet service provider from 8 cents per share to as high as $10. That’s a 12,400% return on investment.
Then there’s deal No. 3. It was a 20-year-old gold mine this VC and his team acquired for $2 million – pennies on the dollar.
By the time they were done with it… the mine was a moneymaking machine. It sold for $580 million. That’s a return of nearly 29,000%.
Deal No. 10 was even bigger. It had a return of 460,000%. That’s enough to turn $1,000 into $4.6 million.
But that’s not all… That pre-IPO company went public on the New York Stock Exchange (NYSE)… The biggest exchange in the world.
And this very same insider plans to list his next deal – No. 12 – on the NYSE, too.
Some VCs go entire careers without finding a single pre-IPO deal that lists on the NYSE… and this VC is going for two.
Of course, there’s no guarantee that deal No. 12 will see gains as high as No. 10…
But it’s worth noting that this deal is already over 80% full… which means it could be closing sometime in the next few weeks. So time is running out.
For more details on this pre-IPO opportunity, click here.
And in the meantime, if you want to invest like a VC, you can search for private deals yourself on crowdfunding platforms like Republic.
They list dozens of startup companies raising money from the general public. In some cases, you can start with as little as $50.
But be sure to diversify your positions and treat these investments like speculations… So don’t bet more than you can afford to lose.
Finally, be prepared to fail. Remember, you won’t succeed on 100% of your “VC-like” investments. You probably won’t win 75% – or even 50% – of the time, either.
But with investments like these, one major winner will more than make up for the losers.
Analyst, Palm Beach Daily