Investors in private startups pocketed a fortune last quarter…
According to a report released last week, they took home $103.9 billion.
That’s a record high — and as you’re about to learn, those profits are expected to keep flowing.
So today, I’ll show you why this is happening…
And then I’ll share two easy ways to get in on the action yourself.
How Private Investors Make Profits
Before I tell you how to take advantage of this profit window, let me back up for a moment…
Let me explain how investors in private startups make money.
Startup investors make money when a company they invested in has an “exit.” These exits happen in two main ways:
- When a startup gets acquired by a bigger company in an M&A transaction, or
- When the startup goes public in an IPO.
And as it turns out, Q3 of 2020 was a record-setting quarter for these exits…
A Record-Setting Quarter for Private Investors
The first half of the year was a disaster…
The coronavirus put a halt to everything, including exits.
But Q3 brought a massive uptick in activity.
For example, as you can see in the chart below (courtesy of PitchBook-NVCA Venture Monitor), exit value increased 292.5% versus Q3 2019.
That was the 2nd-highest quarterly total in PitchBook’s historical dataset, just behind Q2 2019.
What do all these exits mean for their investors?
They mean huge windfalls of profits!
(FYI, even when you factor in the winners and the losers, over the past 20 years, these exits have returned an average of 55% per year. At 55% per year, in 20 years, you could turn a tiny $500 investment into more than $3.2 million.)
Just six months ago, this sort of exit activity seemed impossible.
So what happened?
The 3 Reasons Behind These Profits
This burst of exit activity is due to three main reasons.
New Sectors Soaring: Covid-19 has given a boost not just to biotech, but to industries like Fintech, Edtech, and Telemedicine. The way we work, learn, and receive healthcare are changing — and innovative startups leading the charge are becoming valuable very quickly.
Macro Environment: Low interest rates and a booming stock market are giving investors confidence that innovative startups will command high prices as public companies.
SPACs: As noted earlier, M&A and IPOs are the two main ways that startups exit. But recently, a third way has gained in popularity: a “special purpose acquisition company,” or SPAC.
In Q3, public listings drove the spike in exits — IPOs like Snowflake (NYSE: SNOW), Asana (NYSE: ASAN), and Unity (NYSE: U).
The things is, as PitchBook explained, the strong performance of these stocks in the public markets will “likely drive more IPO” activity…
And for startup investors, it’ll drive more profits.
So — are you in?
Two Easy Ways to Get Started
Crowdability offers a multitude of free resources to make sure you see current startup deals that are available for investment…
And to make sure you know what to do once you find a deal you’re interested in.
For starters, look at our weekly “Deals” email. We send this out every Monday at 11am EST, and it contains a handful of new startup deals for you to explore.
Second, check out our free white papers like “Tips from the Pros.” These easy-to-read reports will teach you how to separate the good deals from the bad.
The profit window is now open — take advantage of it!