How to do angel investing In Pre-IPO Businesses For Newcomers
Angel investing is very popular among companies that are planning IPO (initial public offering).
What Is Angel Investing?
It is a strategy that a company will allow angel investors to purchase a small stake in the company at an extremely early and discounted price.
The purpose of angel investing is to give a company an opportunity to raise funds at a lower price and also provide a chance for a small investor to have a say in the company's future.
But the skill to angel investing is how do you make money out of pre-IPO companies that have no revenues and are new to the world of equity investing?
How To Do Angel Investing
Step 1: Get Investor Education
It is always a good idea to teach yourself by joining online groups or clubs and learn as much as you can about angel investing.
There is plenty of information online or you join an angel investment club for beginners like VC Crowd. You can visit that link to find out more.
This is a great club for beginners or experts that just want the easy option of getting all the work done for them like research, due diligence,
That way you can just sit back and relax and watch your portfolio increase month after month as the club do everything for members and they give members shares in startups every month,
They know what they are doing and they are good at it.
How To Be An Angel Investor With Little Money With VCCrowd
Anyone can join the club no matter what background they come from and the membership starts from just $100 per month and that will be converted into shares for the member.
Angel Investing Platforms
VC Crowd has only invested in about 16 startup companies in the last six years as they are very picky in who they invest in.
How Much Do Angel Investors Make
Members' portfolios have increased significantly in the last few years with the great companies that they have in their portfolios.
I have added an image of the companies below and there are a few already IPO'd and a few more on route to doing so, So as you can imagine members are very excited about the companies in their portfolio.
Step 2: Know your purpose
This step is very important. You should be sure that you know your goal before you start to buy stocks. This purpose will guide you on what your limits should be.
Step 3: How To Do Angel Investing – Research
Now you need to research the company. Search for the financial statements, news, press releases, and other publicly available information.
You should be sure that you can research the financial statements and learn whether the company has money in the bank or not. Search the internet for any updates about the company.
What is new in the product line?
Are they looking to expand?
You should be able to find answers to all these questions. If you become a member of VC Crowd that we mention above then all this will be done for you as a member so as you can see that its a lot of work and it needs to be done, but if you join the club it's definitely going to save you a lot of time and effort.
You will also be getting shares every month on top of all that work so it really is good for education as there is plenty of videos inside and weekly webinars for members to attend with updates on shares and CEOs of the companies attend the webinars for members questions and so on
Step 4: How To Do Angel Investing – Purchase
I hope that you will be sure that you are investing money in a real company, rather than an impossible scam or a shell company.
This last step is your sure bet for a good return. You should be able to see that the stocks have money in the bank or in their reserve fund. You may also decide to wait and see if the company makes any money or not.
These are all decisions you will make on your own.
Pre-IPO Stocks Offers
Angel Investing For Beginners
There are many reasons why you should not be afraid to invest in these kinds of pre-IPO stocks.
Most importantly, you will know for sure that you have made a smart move.
I also think that the investor class is getting a bad name in the news because of such decisions.
But this class of pre-IPO stocks offers much more security than regular stocks.
How To Do Angel Investing, Many investors think that regular stocks are secure, but are not.
If the company closes down or hits a bad period, your investments will be gone! Angels invest in companies that are going to succeed.
But this class of stocks will let you be in touch with the companies that are going to be a hit.
Knows The Companies
The second class of pre-IPO stocks will give you the right amount of security. Angels invest in companies that are going to make hits.
Not companies that are going to close down or hit a bad period. When you have invested in an angel pre-IPO, you are investing in an investor who knows the companies that are going to hit.
Angels will also give you the right to receive quarterly statements containing information on all the companies that the firm holds. Angels will also give you the right to vote for the companies that are under your investment.
This will let you have a say in the future management of the company. Angels are often called the “smart money” because they are taking all the money and are going to spend it as fast as possible.
What can you do with pre-IPO stocks?
This is a question that many traders and investors are asking as it relates to the pre-IPO period. It is an entirely different analytical process that you have to put into place to anticipate what these stocks will do and to predict exactly when it is time to buy and sell them.
Many analysts have specific ways of evaluating pre-IPO securities as to predict if they will perform well. However, there are two main metrics. One of which is called the Solvency II ratio.
It is a very simple calculation – 2(current share price) minus (projected share price). As the name implies, the Solvency II ratio indicates the outlook of the pre-IPO company.
This ratio tells you if the company is likely to have ample funds to pay off its debts and projects. You'll find it interesting that this is one of the most cited metrics when it comes to forecasting the future performance of companies.
However, there is another metric that is much more complicated but is used to forecast the future valuation of the company.
This metric is referred to as the PEG ratio.
As the name implies, this metric represents the price earnings ratio divided by the growth rate.
The simple calculation of PEG is fairly simple. You take the current price of the company and divide it by its projected earnings per share over the next 5 years.
The goal here is to find the price that will make this company attractive. The higher the value, the more desirable the price is. However, if the value is very high, it implies that the market does not believe in the prospects of this company for growth.
That could indicate a potential overvalued stock.
In this case, you could take a very long time before selling this stock. Perhaps years before you would take your profit. You could wait until the stock is at a low enough level to justify selling.
However, this strategy is somewhat risky as it implies that the stock is undervalued. It is a similar situation as taking a loss while waiting to sell a stock that is very overpriced.
As you can see, there are many metrics that are used to forecast future stock performances. However, the simple formula of adding current share price and projected earnings per share over next 5 years to the price per earnings ratio gives you a simple yet effective formula to estimate future stock prices.
These stocks provide investors with the means to invest without the normal pressures of selling stock.
These securities come in handy if you are a long-term investor. These securities give you more confidence about your decisions and have the right amount of security.
You will also be able to watch the companies with these stocks as they are under development.
You should however understand that angels are also known as “pre-IPO stocks“. You should not be scared because these types of companies offer investor security. Angels are generally called “pre-IPO” as they are not offering any securities yet.
Pre-Market – How To Do Angel Investing
Pre-IPO securities are also known as “pre-market“. Angels are normally very early in startup companies and shares are not made available to the public for investment at this point.
Angels can come in four different levels. Angels may come in an offering from the research company, an angel from the angel fund, or an angel from a third party.
I have found that the research firms and angel clubs offer a far better investment. Angels offer far better research and analysis about a company and its future prospectus.