When talking about investing in stocks, most people imagine investing in public companies. However, it’s also possible to invest in private companies and get greater returns. This is a guide on how to invest in private companies.
Join an angel investment network
The easiest way to invest in private companies, apart from investing in your friend’s companies is by becoming an angel investor. Angel investors basically provide seed funding to startups, this is money that the business needs to start and conduct its operations.
Startups aren’t going to know that you are an angel investor unless you are really famous. The best way to gain exposure to new startups is by joining an angel investment network, they typically have minimum requirements, based on your net worth.
Become a venture capitalist
A venture capitalist is basically an advanced angel investor. VCs don’t provide seed funding to startups, they only provide funding for scaling. Businesses usually go to VCs when they already have a proven product and hard numbers that back their claims about the product.
The VC will assess the company, product and key metrics and make a decision whether or not they give funding to the company. It’s important to know that businesses usually go to VCs for huge amounts of money.
As an angel investor you can invest around R100k in startups, as a VC you would typically invest in the millions.
Another way you can find and invest in private companies is by hunting for them. There are people who are always looking for funding on social media for their businesses. There is little to no chance of funding big private corporations if you are not bringing in millions of rands to the table.
This was a guide on how to invest in private companies. Do you have any thoughts or questions? Comment below.