By: Matthew Milner
Trying to pick a single start-up that will become “the next Microsoft” or “the next Google” is pretty risky.
Even wildly successful venture capitalists strike out more than half the time.
So what should an individual investor like you do?
The Key to Market-Beating Returns
The key to making money in early-stage investing is diversification. That means building a portfolio of at least 25 to 50 investments.
If done properly, investment returns can be about 27% each year—that’s nearly 400% higher than the average returns from the stock market.
The thing is, it can take quite a bit of time to invest in 25 to 50 private companies.
Wouldn’t it be great if you could invest in them all at once?
You’d get the convenience and diversification of a mutual fund—along with the huge upside potential of early-stage private companies.
Well, I’m about to show you a special website where you can do just that.
You Can Have it All
The website I’m referring to is a “funding platform” called CircleUp.
CircleUp’s been on a tear lately—we covered the platform just last month after it inked a big strategic partnership.
Like the other platforms we cover, CircleUp connects start-ups that need capital, with people like you who are looking to make investments that have big upside.
But CircleUp is unique: instead of focusing on high-tech companies, CircleUp focuses its attention elsewhere. In fact, many first-time private investors prefer to invest in the type of deals you can find on CircleUp.
Here’s why...
CirlceUp specializes in “consumer products” companies—companies aiming to be the next Ben & Jerry’s, Gatorade, or Starbucks.
Investments in these consumer products are easy to understand—and they can be lucrative, too…
Easy Profits in Consumer Goods
Not so long ago, for example, the beverage maker Naked Juice was a tiny start-up based in Santa Monica, California. It believed there might be a market for all-natural juice in a bottle.
Fast-forward a few years and Pepsi acquired it—for an estimated $450 million.
As another example, just five years ago, Chobani was a small “start-up” that made Greek-style yogurt…
Now The Wall Street Journal says it’s worth about $3 billion.
But historically, knowing where to look for companies like these—and knowing which ones to back—has been tough.
That’s where a new offering from CircleUp comes in…
A “Mutual Fund” for Consumer Start-ups
Recently, CircleUp launched a diversified fund for early-stage consumer companies.
It’s called the CircleUp Marketplace Index Fund, and it offers investment access to a fund that includes 125 different companies.
125 companies would go a long way toward providing you with the diversification you need.
Company Selection Process
To select which start-ups are accepted into the fund, CircleUp leverages a combination of technology and human analysis:
First, its software aims to identify the most promising candidates by crunching numbers like Nielson data and customer reviews. If a company gets past the initial filter (just 5% make it), it’s then reviewed by CircleUp’s team of investment professionals.
This selection process appears to be working:
Start-ups that raised funding on CircleUp went on to increase their revenues an average of 86% each year. That’s roughly 3 times higher than the growth rate for the companies it rejected.
Not only that, but the investment performance for the 131 companies that have raised capital on CircleUp since 2012 has been strong: on average, the companies have increased in value by 50% per year.
The Details Behind This Unique Opportunity
Here are some details of the CircleUp fund:
Fees: Compared to a traditional fund that manages early-stage investments, CirlceUp’s fees are far lower, so investors get a bigger share of the profits.
Fees are 0.5% annually, with 0% carry (“carry” is the fund manager’s share of the eventual profits). A traditional fund typically charge a 2% fee and 20% carry.
Liquidity: In certain cases, CircleUp will allow you to sell your investment after 12 months. That’s less than the typical 5-to-7 year holding period for a private fund.
Access: But here’s “the catch.” Initially, the minimum investment for this product was $25,000—but due to strong demand, it’s been raised to $250,000.
Not to worry, however—we have some good news for you:
Once Title III of the JOBS Act goes into effect next year, CircleUp plans to open another fund—with far lower minimums.
That means everyone will be able to invest, regardless of their income or net worth.
In fact, if the minimums are similar to Title IV deals, you might be able to jump into this diversified “start-up mutual fund” for just a few hundred dollars.
To learn more about the opportunity with the $250k minimum, click here »
And if you’re interested in getting into CircleUp’s new fund with the far lower minimum, stay tuned to Crowdability… we’ll give you a heads-up as soon as it opens.
Please note: Crowdability has no relationship with CircleUp, or with any of the platforms or companies we write about. Crowdability is an independent provider of education, information and research on start-ups and alternative investments.
Happy Investing,
Matthew Milner
Founder
Crowdability
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