What was the most profitable investment of all time?
Was it Warren Buffett’s investment in Coca-Cola in 1987?
Was it when savvy investors picked up shares of Amazon or Netscape in the 90s?
Or was it something more unexpected?
I recently came across a list of the world’s most profitable (documented) investments.
There were plenty of things that made them different from one another...
But what shocked me was the one thing they had in common.
Investment #5 – Oil the Profit Wheels
If you’re a student of business history, you might be familiar with the 5th most profitable investment of all time ...
In 1867, Henry Flagler invested $100,000 into John D. Rockefeller’s Standard Oil Company.
By 1913 – 46 years later – Flagler’s estate was worth over $75 million. That’s more than $1.7 billion in today’s dollars!
Flagler’s total return: about 700x.
Investment #4 – Biggest Garage Sale Ever
A 700x return is nothing to sneeze at. But that was back in 1913. Do we still see returns like that today?
Well, in 1995 – back when my parents thought the “World Wide Web” was a children’s book – a venture capital firm called Benchmark Capital invested $6.7 million into an online “garage sale” website.
This site, known as eBay, eventually went public. It turned Benchmark’s $6.7 million investment into $5 billion.
That’s an astounding 745x return in just 4 years.
Investment #3 – Big Returns for a College Dropout
But there’s another tech investment that performed even better than Benchmark’s bet on eBay.
In 2005, Peter Thiel put $500,000 into a social networking company for college students.
At the time, he couldn’t have known what the little company would turn into… and what it would do to his bank account.
That start-up went on to become Facebook. When Thiel sold most of his shares in 2012, his $500,000 investment turned into more than $400 million.
Total return?
Over 800x – that’s 80,000% – in just 7 years.
Investment #2 – “The Gravy Train?”
Imagine it’s the year 1903.
Your energetic, young nephew visits you at home to discuss a new business idea.
He’s forming a company with a friend to build “horseless carriages” and needs investors.
Would you have backed him?
John Gray did. His nephew then teamed up with Henry Ford to form the Ford Motor Company.
By 1919, John’s investment of $10,500 had turned into more than $26.25 million.
That’s nearly a 2,500x return in 16 years.
Investment #1 – The Sweetest Returns
Question: What’s “sweeter” than a 2,500x return?
A 10,000x return!
In 1891 Asa Candler purchased the formula for Coca-Cola from a Southern pharmacist.
The price?
$2,300.
Candler sold Coke in 1923 – just 32 years later – for $25 million
That’s a jaw-dropping 10,868x times his money.
For every $10 invested, he earned more than $108,000 in profits.
What Do These Investments Have In Common?
Each of these investments provided a stunning return for investors.
But what shocked me most was this:
Each of these investments was made when the company was still private...
They hadn’t yet touched the stock market.
Every one of them – whether it was a tech company like Facebook or a consumer products company like Coca-Cola – was a private “start-up” investment.
Perhaps this shouldn’t have been so surprising after all:
Early-stage start-ups are risky...
But with that risk can come outsized rewards.
How To Earn High Returns, With Lower Risk...
This isn’t to say that you should throw caution to the wind.
On the contrary: if you’re going to become an early-stage investor, you need to manage that risk very carefully.
And what’s the most important way to do so?
Diversification.
Studies have shown that, if you invest in a certain number of early-stage businesses, you have an extremely high probability (more than 96%) of at least doubling, if not tripling, your money.
As you continue to read the Crowdability newsletter, we'll oftentimes highlight new early-stage investment opportunities that you can use to begin building a diversified portfolio of start-ups.
So keep reading...and enjoy!
Best Regards,
Founder
Crowdability.com
