By | Alex Konanykhin | Executive Producer of the Unicorn Hunters show – “The Only Show That Can Make You Rich” with Steve Wozniak and other business leaders
Here’s a 15-billion-dollar question for you: how do you evaluate startups?
The first 20 investors in Amazon got stock that has since grown in value over 30,000,000%, from $50,000 to $15,000,000,000, straight to the top third of the Forbes List. You could be among them if you could accurately assessing the value of emerging growth companies!
On the other hand, so many startups fail and so many investors have to write off the related investments as a total loss.
How can you make sure you invest in “the next Amazon”, not in some future “cautionary tale”?
Ever since I launched our Unicorn Hunters show, I’ve been amused by how many investors apply clearly erroneous formulas to evaluating pre-IPO investment opportunities. What throws them off the target is not their ignorance; on the contrary, it is their education and experience.
Pre-IPO financing is a new market. Until recently, pre-IPO companies had been prohibited to advertise their offerings. Thus, unless your nephew pitched you his startup idea, you had few chances to invest in pre-IPO companies, especially those with strong validations. That financial niche was monopolized by VC (venture capital) funds, relegating individual investors to the post-IPO market, where valuation growth was hardly ever astronomical.