Founded in 1972, Sequoia Capital is one of the oldest venture capital (VC) firms around.
Headquartered in Silicon Valley’s Menlo Park, its core focus is technology startups.
Sequoia even 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.
Now, on the surface, Sequoia’s track record looks flawless. I wouldn’t blame you if you thought it had some type of crystal ball.
But 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’re striking out 90% of the time. Yet they’re still highly successful.
And today, I’ll show you how to apply this strategy to your own portfolio – plus tell you a unique way to get in on these types of deals…
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 shows you 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.
And as we showed you Friday, the average VC fund has crushed the returns of public markets over the long term using this strategy.
So VC investing is the perfect way to swing for the fences for investors craving outsized returns.
There’s just one giant 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 a regulatory change, these firms are no longer the gatekeepers to some the best deals on Wall Street…
Main Street’s Loophole
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+ offerings. And in some cases, you can buy into these private deals with minimums of $250 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.
This Wednesday, Daily editor Teeka Tiwari is hosting his first ever U.S. Energy Independence Summit to share details on a pre-IPO opportunity that’s poised to have a huge positive impact on U.S. oil production.
This company has found a way to produce environmentally sound oil – without drilling and fracking – and at a cheaper cost than anywhere else in the world…
And a Wall Street titan has already written a check to become its biggest shareholder.
It’s the kind of deal that used to be reserved for multimillionaire VC investor and firms… but now you can take part for just $1.25 per share… And a $500 minimum.
So if you want to learn more about this tiny company making shockwaves in energy and finance, join Teeka this Wednesday.
You’ll even learn which Wall Street giant has its backing… and how you can back this company while it’s still private.
Click here to reserve your spot at Wednesday’s free event.
And in the meantime, if you want to invest like venture capitalists, you can search for private deals yourself on crowdfunding platforms like SeedInvest and MicroVentures.
They list dozens of startup companies raising money from the general public. In some cases, you can start with as little as $100.
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 achieve success on 100% of your “VC-like” investments. You probably won’t win 75% – or even 50% – of the time, either.
But one major winner will more than make up for all the losers.
Analyst, Palm Beach Daily