Three “Billion Dollar” Pre-IPO Investing Rules

By Wayne Mulligan, on Thursday, November 10, 2022

Fred Wilson is one of the most successful startup investors in the world.

He was an early investor in startups like Twitter, Twilio, and Etsy — all of which became multi-billion-dollar publicly traded companies.

That’s why he regularly tops Forbes’ “Midas List” of early-stage tech investors, and is rumored to have a $1 billion fortune.

So today, I’m going to reveal three of Fred’s most important rules for startup investing success.

Rule #1: “Invest in Bits, Not Atoms”

First of all, when you invest in startups, you should invest in “bits” not “atoms.”

In other words, rather than investing in businesses that produce physical products, you should focus on software-based businesses.

Why? Because companies that build physical products have higher operating costs!

Sure, some hardware companies will become successful. But statistically speaking, higher costs correlate to a higher risk of going out of business.

By investing in software companies, you’re more likely to back companies that survive and thrive — and you’re more likely to earn fantastic returns.

Rule #2: “Love Your Losers”

With this rule, Fred is acknowledging an indisputable fact:

If you want to earn big returns in the startup world, you have to take some risk.

Therefore, it’s inevitable that you’ll back some “losers” along the way.

If you build your portfolio properly and diversify your startup investments, your winners should more than make up for your losers.

So embrace them, love them. They’re part of the formula that will lead you to success.

Rule #3: “Keep it Simple”

Fred believes that the best startups develop a drop-dead simple solution to a big problem.

As far as Fred is concerned, the more complex a product is, the more likely it will be to fail.

Based on Fred’s track record, I’d take this lesson as gospel…

Time and again, he’s invested in companies that others considered “too simple,” but have gone on to become tremendously successful.

For instance, when Fred first invested in Twitter, people thought he was crazy. You see, unlike other online services that allowed people to publish book-length posts, Twitter allowed just 140 characters.

This created a very limited user experience — but it turned out to be a perfect solution for publishing quick but critically important information.

In the end, it’s estimated that Fred made more than 100x his money on Twitter. That’s a 10,000% return.

That’s like turning every $10,000 you invested into $1 million.

Your Path to Startup Millions?

By following rules like these, Fred is now worth an estimated $1 billion.

You could follow these rules, too — and put yourself on a path to earning market-beating returns in the startup space.

If you’d like to learn more about what to look for in startup investments, check out our “10 Commandments” report here »

This is where we outline ten things we look for before making any startup investment.

Essentially, it helps us identify only the most profitable early-stage investment opportunities.

And we believe it could help you quickly start building your portfolio of startup investments — which will become extremely important as the stock market gets more and more volatile.

Happy investing.

Best Regards,



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