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.

The Real Nature of Money – One Compassionate Capitalist’s Perspective

Recently I broadcast an episode of my Compassionate Capitalist radio show about the events leading up to the economic malaise we have been experiencing, the realities of the “fiscal cliff”, and some good things that might just occur in the coming year.

Broadcast:  Compassionate Capitalist Radio Show – Economic Perspective and Outlook

It prompted a question from an entrepreneur:

If the SNP goes to 700, how will this matter?

If the SNP goes to 700, what is the best way to truly know what people with money are waiting for?

Interesting question Rick.   Not sure if I am the best person to answer it for a number of reasons…..  I know a lot of wealthy people took their money out of the stock market when all of this mess started.   The ones that think long term either took it out and have it “sitting on the sidelines” as I have said, happy with the 1-2% they might get or moving it into Bonds where the interested rates are playing to their advantage.   If they missed getting out of the market when it first started to tank,  they have already excited or are in the process of exiting…causing the slide itself.   When it hits that mark, smart investors that are still in the market will sit and wait for the rise, because they realize the only ACTUALLY lose money if they sell at that point.   Unless they need the capital loss to offset a capital gain.  The people that make money on a fall like that are the institutional investors and hedge funds that play the margin and bet the market will fall so they get paid for winning that bet.  But in this day and age, harder to get the “seller” for those types of bets.  Hitting 700 may be the trigger that gets some of those investors on the sidelines to get back into the game.

Good companies with solid operations and profits can easily have an undervalued stock when the stock market is in a free fall—or even a flat bear market, and then when it rights itself, that stock will regain it’s value, creating a windfall of capital gains for that savvy investor.   The reality is that the market goes up and down.   It has and always will.   Economic factors will contribute to it the start and the stop and the length of a bear or bull market, but inevitably there will be a change in course.   Just as I spoke of in my radio show last Friday….no market can forever go up, nothing grows in value forever, and the reason the economic factors that later become defined as a “bubble” is by its very visual image….something that will grow until it pops by it’s own unstable nature.

If the market hits 700, and that is not to say it will or won’t, it won’t be because of a clear indicator of economic malaise or any fiscal cliff…those are contributing factors, but it will be because of the people that buy and sell and large institutional traders that are making large hedged bets that can shift a market and cause corrections in the market.

I found this interesting article that talks about the cycles and shifts of the market decades and maybe it will bring a little solace to your concerns…. http://www.tradingonlinemarkets.com/Articles/Trend_Following_Strategies/History_of_Stock_Market_Cycles.htm

AND yes it will be bad, but it won’t last forever, part of that is out of our control. And don’t let the idea of it being out of your control cause fear….. because remember fundamentally…. the money doesn’t go away.  It just moves.   It is all still there.   The challenge for the entrepreneur is to find that investor, and convince him that his opportunity is a more profitable…and potentially safer…. investment.   If the market goes to 700 and the investors that have potential to be angel investors are out of the market, along the way a light bulb will have gone off that says…. INVEST IN PRIVATE COMPANIES….you have more control over their success than you ever had in that public stock that you held that went up and down and all around.

….just one gal’s opinion.

Hope you have a Happy and Prosperous New Year.

Best Regards,

Karen Rands

To get the full economic assessment and story behind both the broadcast and the answer to the question,  please read my (long – but thorough) article blog post on Entrepreneur Blog Space

Bottom Line-

Want to take back control of the economy, your wealth, our country?  Become a Compassionate Capitalist.

What is a Compassionate Capitalist – besides something we need more of?
A compassionate capitalist is someone who invests Time, Resources, Knowledge and Money into entrepreneurial endeavors to bring innovation to the market, to create jobs and to create wealth for the founders and investors. It is the ultimate trickle down economic recovery plan. Because, if you invest in building up companies that can thrive in the new economy, then jobs will follow, and income from those employed will be spent in the marketplace and those old traditional companies producing goods and services will also gain economic stability and keep employees and maybe even expand with purchase of equipment or the addition of employees. You can’t control what our politicians do.  You can’t control what a President of a public company does or how the market trends will impact their value.  You can’t control how the bank will value your property .  YOU CAN Control if a company with innovation can build a good company that creates REAL Value and real jobs.

New Year’s Resolution….. Become a Compassionate Capitalist!