Top 5 Reasons Private Equity Investing will be the Next HOT Investment Trend

I’m an economist by training and a capitalist by living.   I have been analyzing and assessing market trends for decades and really became a student of it when I discovered my foray into venture capital and early stage investment markets in 2001 was at the downhill slide, not the uptick for that investment trend.  But I rode that wave and have been actively (and successfully) building an angel investor community in Atlanta and helping early stage company get the capital and resources they need to grow.  

This crazy economic roller coaster we are on now only reinforces what I learned in 2002 when I analyzed why the angel investment and venture capital market got so crazy to create the dot.com explosion and ultimate implosion.    Money seeks a way to multiply itself.   Think about every big “trend” where great wealth was created by the market makers and the early adopters, only to have it implode and cost the late entries and followers a lot of money.   S&L bail out, Junk Bonds, dot.com, to the current hedge fund frenzy and the mortgage collapse.    So why do I think that Private Equity Investing will be the Next Hot Thing?  I have 5 reasons:

1.  Sophisticated investors that haven’t yet participated in angel investing have realized that ALL investment classes are risky.  They think:  “With the collapse of the stock market and the real estate market, might as well invest in something I know is risky but I have potential to get 4-8X more ROI!”

2.  Market Makers are going to be looking for new places to put money and the OTC BB market with the new controls recently implemented will be the next favored market place because it easier to directly reach investors to create the market for that stock.

3.  Early stage companies that have received private equity investment from angels will be looking for new ways to exit and the OTC BB public offering is not as expensive as the big exchanges, but still gives access to fund managers for large PIPE investment for growth capital and acquisition isn’t as readily available as it was the past 3-4 years.

4.  Angel Investors already know the early stage company’s value is at the bottom and will only go up or go out of business, but they can more effectively impact the company’s value going up than they can with a public company.

5.  With the advent of strong investor groups forming and investor portals designed specifically for investors to be able to identify, investigate and invest in early stage companies the way eTrade provides that access to public companies, individual investors can have a community to collaborate with on early stage companies.   Visit www.NationalNetworkofAngelInvestors.com (NNOAI) to help build an investor community the way you dream it should be. You can get a free report on the 5 Billionaire Secrets and excerpts from the popular how to book for angels: “Inside Secrets to Angel Investing” when you optin on the NNOAI site.

So watch this space because angel investment will return as one of the best asset classes for sophisticated investors to increase their wealth while the economy enjoys a rebound by early stage companies getting capital to grow and create jobs.

What Keeps 750,000 Accredited Investors from becoming Angel Investors?

What Keeps 750,000 Accredited Investors from becoming Angel Investors?

Karen Rands, covered this topic on her Compassionate Capitalist Radio Show recently.

In a nut shell….lack of knowledge — The men and women who are earning over $350,000 a year in income, as tracked by Census and the IRS, are likely executives in a large company or run small to medium size businesses.  They didn’t make their money in a venture backed high tech company and likely aren’t part of a company that raised capital to get started, or if they are, they weren’t part of the team that founded that company.   They aren’t being encouraged to invest in private companies by their financial planner.  For the most part they aren’t even aware of “angel investing” as a wealth creation strategy and may not know that stock of private companies are available to purchase before they go public.   They are the ones that try to “get in on” the first issue of public stock for the hot company they are hearing about.  They are sophisticated investors so like the idea of having their money work for them.  That is why they often invest in real estate.  Yet if they knew they could apply the same practice they use to decide if a property is a good investment or a public stock is a good buy to the decision to purchase equity in a private company, and have the opportunity to own a % of multiple entrepreneurial endeavors with strong potential, they would choose to include that as part of their wealth accumulation strategy.

According to the US Census, there are an estimated 1,150,000 households that earn over $350,000 a year. Furthermore, there is an estimated 250,000 active angel investors involved in structured groups and actively considering investment in early stage companies as a means to create wealth in their diversified portfolio. And if we assume there are at least 150,000 of the wealthiest that have too much money to be angel investors…they don’t invest directly into companies, they invest in the funds that fund the companies. That leaves an opportunity for the remaining 750,000 to become angel investors.

Listen to the Podcast for the full report.

Whenever there is a shift in the market, there are key factors that trigger it and contribute to a successful shift.  The 3 A’s of Market Movement:

  1. Awareness
  2. Adoption
  3. Access

Awareness of the potential to invest in a high growth company before it goes public or grows in value to attract an acquirer is growing as “crowd funding” news continues to spread around the internet and in the general press.  With the advent of the Jobs Act of 2012, “crowd funding” became a common term bantered around, often within the wrong context, but none the less a phenomena that people were talking about.  Wealthy men and women who consider themselves “sophisticated investors” with an  above average Financial IQ are curious about this as a new “hot” investment platform.  Yet there exists a cloud of confusion around “crowd funding” because although passed by Congress and signed into law by the President, the sale of securities is regulated by the Securities Exchange Commission (SEC).   As of this writing, the SEC still has not issued their rules for the Title III part of the Jobs Act that specifically addresses  how companies will do equity crowd funding at a national federal level.   Currently 4 states offer specific legal guidance and approval for companies incorporated in their state to raise money from investors in their state via crowdfunding methods- Kansas, Georgia, Michigan, and Wisconsin, with Washington, Alabama and South Carolina considering legilsation.   Companies are permitted through Title II to raise capital from Accredited Investors under the Reg D 506c and Reg A, under specific conditions, and market to them via the same means that companies use in rewards based crowd funding.  Learn more about history and status of crowdfunding.

As this community of sophisticated investors who would easily qualify as “accredited investors” via the certification process by providing copies of their W2 or past tax filings become aware of the opportunity to invest in private companies they must learn to adopt the mentality of an angel investor.  Angel investors think differently than regular investors who are simply wealthy.  Angel investors have to have vision and imagination.   Entrepreneurs seeking angel investment must be able to cast a vision that the potential angel investor believes can be a reality.  They must imagine the potential results that the management team will be able to produce with the product and strategy they are offering that is at the core of their investment opportunity.  If the entrepreneur is successful in conveying that story and it is better than the one the investor just heard or will hear the next day, then they will be the lucky one to get that angel investor’s money.   Traditional investors look at the history of a public stock to anticipate a trend, the market comps on a real estate to predict a trend… all with the intention of buying low to sell high.  None of that really exists with private companies.   That is where an investor has to “think outside of the box” and think about the company beyond just what has been done so far and grow to understand that buy adding private equity investment to their portfolio they have an opportunity to produce a greater return…if they don’t lose the entire investment.   Investment in private companies is by its nature very risky.   It is an illiquid investment and sometimes the return doesn’t come for many years down the road.   So as sophisticated investors adopt private equity investment in early stage companies as a strategy to grow their portfolio, they must also be extremely patient.  They also must take the time to learn about the legal requirements to make this type of investment.

With knowledge that they can own pieces of many companies, and the desire to become an angel investor, all that is left is access to the deals and the due diligence.  Traditional angel investors join groups that help with the screening and due diligence process. Committees are formed to screen deals so only the best get a chance to pitch to the group at large.   Committees are formed to conduct due diligence on the company and report back to the group of investors so they can decide to participate in a pool of funding for that company.   They may have an obligation participate on a committee periodically and to attend the monthly pitch meetings and follow up meetings.  They can spend this time because they typically don’t have a day job.  They are wealthy because they had an exit from a company or an investment that provided them with disposable income to invest.   They “self certify” in traditional angel investments so as to avoid full disclosure on their actual net worth and sources of income.  The 750,000 accredited investors we are talking about here, that are void in the marketplace now, are too busy to participate in those groups and participate on a committee that requires time, even if the group is actually located in the city they live in.  They have access to public stocks through stock portals to do the research and trades whenever they want, 24/7. They have real estate agents find them investment properties.   Their financial planner won’t find them private company investment opportunities because of the rules they have to adhere according to FINRA.  So gaining access to a variety of opportunities to consider that also have full disclosure and due diligence information available is critical as the final trigger in the market shift.

Kugarand Capital Holdings, LLC is launching a secure portal to provide the opportunity and the due diligence necessary for this type of sophisticated accredited investor.   The 22 year old NBAI is being transformed into The National Network of Angel Investors comprised of small regional groups forming virtually around the country based on regional or special interests.  Education is provided on an ongoing basis through articles, white papers, podcasts and videos.  Sophisticated Accredited Investors seeking to understand how to become an Angel Investor…how to adopt the mentality, but also learn the ropes of being an angel investor… applying the knowledge of stock market and real estate investment to private equity investments will purchase the book “Inside Secrets to Angel Investing” as their road map.

Are you an investor that is tired of the volatility and unpredictability of the stock market? Are you frustrated that you have little influence to affect the management or operation of that public company? Have you realized that the public stock market is actually pretty risky and the overall return on investment isn’t that great? Then the time is now to participate in this market shift….  Then learning how to invest in private companies, purchasing shares in a company before it goes public, while the valuation is still low, could be the wealth creation strategy for you.   Tune in to learn how to join the world of compassionate capitalism

Find us on Facebook:  https://www.facebook.com/thenationalangelinvestornetwork
Follow us on Twitter: https://twitter.com/nnoai

The National Network of Angel Investors

What Motivates an Angel Investor to Join an Investment Group?

Compassionate Capitalist Talk Radio: Each angel investor group offers different benefits to high networth individuals that understand the benefit of investing in early stage companies. Understanding their motivation helps entrepreneurs decide which groups to pursue as help those building angel groups understand how to attract members.

Investors will join a group for the community and social aspect as much as the business purposes.   For business purposes it is to see better deal flow, share the burden of due diligence, and have greater leverage in negotiating the terms on the deal.   Investors need to understand the structure of a group they are joining.  In some groups they all make individual decisions and others they make group decisions.   In some groups they pool their funds and have capital calls, and so the investor is very passive in the decision process but can add on their funds.   Investors wanting to join a group should understand these aspects of a group and any entrepreneur preparing to present to a group should find out what their decision process is all about.  

This radio show, podcast, explores the different types of groups and the motivations for angels that join those groups, and also what entrepreneurs should expect when pitching or meeting with those groups.

Listen Now!

Check out these investment websites: www.kugarandholdings.com, www.angelinvesting101.com, www.NationalNetorkofAngelInvestors.com

Top 75 Angel Investor Groups in the US – NBAI on the list!

Since 2005, we have been working diligently to rebuild the angel group, the Network of Business Angels & Investors.   We have positioned ourselves a little different that other traditional angel groups.   The members of NBAI collaborate on due diligence, but make indendent decisions.   They are willing to invest early stage capital in companies not from Georgia, as long as there is a lead group of investors in that company’s back yard.  Lastly, they are somewhat industry agnostic, having invested a wide variety of emerging growth companies since inception in 1994 and since the rebirth in 2005 (http://www.launchfn.com/id155.html  more are being added as I write).  The angel investor members of NBAI look to see that the business model makes sense, they have a solid management team that can execute, a unique value proposition to the market and can the investor expect to make money on the investment.   As one of our investors at the last NBAI Meeting so apply demonstrated with his t-shirt under his jacket “What’s $$$ in it for me?”.   Anybody that thinks angel investors aren’t ultimately motivated by a positive return on investment is simply naive.  Yes they may have double bottom line motivations….minority owned business, or good for the environment, or solve a terrible health problem….but at the end of the day it still needs to produce a return.   Think about, if it doesn’t produce a return, that means the company failed and any other motivation they had to be a “Compassionate Capitalist” to bring innovation to the market, create jobs, create a legacy….also vanished with the failing of the company.  

Making the Inc Magazine’s Top 75 Angel Investor Group is validation and reward for the hard work of the last 4 years to bring to Atlanta and the Southeast a “country club” for small business investors who want to look at good deals that have potential, make friends among their socio-economic peers, and make some money by being “Compassionat Capitalists”!  http://www.inc.com/magazine/20090101/wingmen-and-women.html

Currently the NBAI Member Meeting is held on the 2nd Wed of each month in Atlanta.  Our next event is on June 10th, followed by August 12th.   All the details about the event, attending as a non-member and applying to be considered for entrepreneurs can be found at http://www.launchfn.com/id150.html

New Members get a copy of the 5 book series authored by Karen Rands “Learn to Be an Angel Investor” that goes through the history, process and decision cycle for a new investor.  http://kyrmedia.com/index.php

NBAI (www.nbai.net) has great plans instore for the remainder of this year.   We are joining the Angel Capital Association and we are using AngelSoft so our members can collaborate on deals they like and then syndicate with other angel groups.   We are laying the foundation to start an angel fund for providing the first capital in on the A Round.   It is truly an exciting time as NBAI grows to new heights.

Picture from a recent NBAI Meeting

How Do Angel Investors Evaluate Investment Opportunities During Tough Economic Times?

How will today’s challenges in the economy impact angel investing? How do angel investors evaluate investment opportunities during tough economic times? If you are an entrepreneur or an investor, you should listen up! Karen Rands shares her opinion and insights based on the recent economic developments in the stock market and her attendance at the regional meeting for the Angel Capital Association where 10 angel groups from the southeast converged to discuss deal flow, valuation, and investment methodology.

Listen now!

Check out these investment websites: www.kugarandholdings.com, www.launchfn.com, www.nbai.net, www.kyrmedia.com, www.myvirtualangelworld.com,  and www.dothedeal.org

Listen, Learn, Enjoy and Share with a Business Associate!

 

How Will Today’s Economic Times Impact Angel Investing?

How will today’s challenges in the economy impact angel investing? How do you feel? Are you worried? Is Private Equity investing in early stage private companies really a viable alternative to stock market investing as an asset class?

What does Karen Rands think? Listen as she shares her opinion and insights from her recent radio show: Listen now:  http://kugarand.podomatic.com/entry/2008-10-13T14_16_11-07_00 !

Angel Investors and Savvy Investors seeking to learn more about this intriguing asset class are making plans to attend the last two investor forums hosted by the Network of Business Angels and Investors before year end:  Oct 22nd and Dec 3rd.    If they are going to reallocate their liquid assets into an asset class that could generate 4-10 times their investment in the next few years, they need to begin the process of: Idenification, Investigation and Investment as soon as possible to take advantage of year end market movements.  The sophisticated investors we have been talking with are eager to get back into angel investing or get connected with a group they can learn more about the process by attending these scheduled event in Atlanta.    To learn more about the events and RSVP to attend, please go to www.dothedeal.org or visit http://launchfn.com/id150.html

Get your 5 Secrets of Billionaires! Go to www.learntobeanangelinvestor.com

Check out these investment websites:  www.nbai.net, www.kyrmedia.com, and www.howtobeanangelinvestor.com

SPEC Talk Radio: Interviews Exciting Companies from the NBAI September Event!

Karen Rands interviewed exciting companies which presented at an NBAI Private Equity Forum on September 10th on this session of SPEC Talk Radio.  SPEC Talk Radio is the SE Private Equity Community Radio show that is scheduled for every Friday at Noon.   It is where the investor and entrepreneur community tune into hear great insights into how company grow and succeed and how investors participate in this exciting asset class.   This recording of the broadcast from September 12th,  is an opportunity for investors to hear first hand about some hot new, growing companies and for other entrepreneurs to learn from others that are leading the way in building successful business models.  Although not exactly like their pitch to the angels at the NBAI event, because the entrepreneurs cannot publically solicit for investment, the entrepreneurs cover the other relevant areas of information an investor would be interested in.

SPEC Talk Radio: Interviews Exciting Companies from the NBAI September Event!

To get more information about these companies go to www.launchfn.com and click on the Company Profile Tab. 

Visit www.kyrmedia.com for information for investors and entrepreneurs.

Listen, Learn, Enjoy and Share with a Business Associate!