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Why the Democratisation of Pre-IPO Startup Investments Matters for Aspiring Angel InvestorsDate Posted: 20 December, 2023
In the pursuit of groundbreaking ventures that reshape the world, the globe’s wealthiest individuals are increasingly turning their attention to startups, seizing opportunities before these companies go public.
Investing in the early stages allows individuals to exert greater influence and enhance value by attracting media attention. The potential for substantial returns arises when backing startups that eventually reach an initial public offering (IPO) or get acquired by larger entities—returns that often surpass a typical investor’s lifetime gains.
A prime example is Microsoft Corp. Co-Founder Bill Gates, an iconic entrepreneur with a penchant for startups. Gates, through Breakthrough Energy, has strategically acquired shares in companies dedicated to combating climate change.
Unlike the past, when investing in Microsoft or Amazon was only possible post-listing, today’s landscape allows individuals to build a diverse startup portfolio with a mere £1,000. Gates, with abundant resources, annually allocates tens of millions to companies focusing on reducing CO2 emissions. Breakthrough Energy has invested in 96 startups, including Fleetzero Inc., developing battery-powered cargo ships for sustainable long-distance freight, and Bloom, working towards sustainable bio-based carbon for materials and fuels.
Other titans in the top 10 wealthiest, such as Tesla Inc. CEO Elon Musk, Amazon Founder Jeff Bezos, and Oracle Corp. Co-Founder Larry Ellison, have also embraced significant investments in startups. The Jumpstart Our Business Startups (JOBS) Act has democratized access to these opportunities for everyday investors.
The ongoing disruption caused by artificial intelligence (AI) presents a unique landscape for investors. Unlike the early 2000s, when institutional investors dominated pre-IPO ownership, today’s investors can actively participate in profiting from 21st-century technological advancements.
Investing as little as £100 or £150 in a single startup is now a reality, offering everyday investors the chance to diversify their portfolios. While £1,000 may seem modest, historical examples illustrate that investing similar sums in companies like Google, Microsoft, or Amazon at their IPOs would have yielded millionaire status by now.
As the investment landscape evolves, the once-exclusive realm of pre-IPO startups is now accessible to a broader audience, providing unprecedented opportunities for diversification and potential wealth creation. How do you see this democratisation of startup investment impacting the future of wealth accumulation for individual investors?