On the last day of 2021, one company made history…
That’s when a little-known private firm that had grown into a unicorn went public.
A “unicorn” is a private company (also called a “pre-IPO”) that has reached a valuation of $1 billion or more.
Past examples include Airbnb, Facebook, and Google – some of the biggest investment winners in history.
But until recently, regular investors in the U.S. never had access to unicorns before they went public.
So only venture capitalists, institutional investors, insiders, and ultra-wealthy individuals made the bulk of those gains.
However, that’s no longer the case. Federal legislation has finally undone more than a century of injustice…
And just before the start of the new year, 978 ordinary investors watched their very own unicorn go public.
The stock rose more than 46% on its first day of trading alone… (For comparison, the average annual gain of the S&P 500 is 9% over the last 25 years.)
It was a stunning end to a five-year run that took the company from a $20 million valuation in 2017 to more than $2 billion… a 100x increase in just half a decade.
It gave hundreds of mom-and-pop investors a chance to profit alongside Bill Gates and other Silicon Valley icons…
And I believe there will be more private opportunities like it in 2022 and beyond.
In short, this could be one of the most significant wealth-building events in over 20 years.
So today, I’ll explain how to use that same strategy to profit from your own pre-IPO unicorns…
But first, let’s talk about how legislative changes have completely opened the floodgates for bigger and better private investment opportunities.
A Sea Change Creates a Surge of New Opportunities
In 2017, a company called Heliogen, which uses artificial intelligence to create renewable energy, initiated a Reg CF offering.
And last year, it became the 100x juggernaut I mentioned above. It’s now public and trades on the New York Stock Exchange.
A Reg CF offering allows private startups to raise up to $1.07 million each year from accredited and non-accredited investors.
But a decade or so ago, this wasn’t the case… most pre-IPO deals were off-limits to the general public.
Only celebrities, politicians, and wealthy, accredited investors (generally, those with a net worth of at least $1 million) could get involved.
That all changed with the JOBS Act in 2012, making it easier for smaller, early-stage companies to access capital. It also allowed the general public (not just accredited investors) to invest in these private deals.
The Securities and Exchange Commission (SEC) eventually enacted guidelines for companies to take advantage of this new law. And the provision went into effect in 2015.
In March 2021, the SEC raised the limit on how much companies can raise through a Reg CF listing – from just a little over $1 million all the way up to $5 million.
What’s more, companies can raise that amount every 12 months.
The changes give companies even more incentive to go through the regulatory hurdles involved with creating Reg CF listings.
After all, they can now raise nearly five times as much money from their first offering and then continue raising that same amount every year going forward.
How You Can Get In on the Next Unicorn
You can see in the chart below that the average venture capital (VC) fund often outperforms public market returns, especially over the long haul:
Over the last 25 years, the average VC firm returned about 30% per year, while the S&P 500 returned closer to 9% per year.
These private deals are also less volatile since they trade outside the stock market.
A report by asset manager Blackstone found that private equity consistently outperforms public markets… while providing diversification, lower volatility, and protection in times of market stress.
Of course, private deals are still risky. Nine out of 10 startups fail. And even the best VCs have 100% losses with these investments.
So only invest small amounts you can afford to lose. No amount of vetting can eliminate the risk associated with pre-IPO companies.
To find your own Reg CF deals, you can search a crowdfunding platform like Republic.
It’s one of the top equity crowdfunding firms in the space, with a 19% market share. And it’s easy to set up and fund an account.
Just be sure to spread your bets across different individual investments to reduce your risk and create the best chance of hitting a big winner.
With all the volatility we’re seeing in the public markets, now’s a great time to get exposure to the best private companies.
And recently, my team came across a small, private tech company that could very well become the next big private market deal for everyday investors – one you can access for about $100.
It’s poised to disrupt a fast-growing, multibillion-dollar market with over 5 billion users…
If it takes off, it has a shot at becoming the next tech unicorn that could deliver life-changing gains like Heliogen.
But as with any private deal, space is limited. And this could be the last chance for you to get in while this company’s still small.
Paid-up Palm Beach Letter subscribers can read more about this company here.
And if you’re not a PBL subscriber, click here to get started…
You’ll learn about one of my favorite market trends and also get a free pick that could 10x your money in the coming months.
Let the Game Come to You!
Teeka Tiwari
Editor, Palm Beach Daily