Here are four areas where investing in startups and the private markets is superior to investing in Wall Street:
Investing in a Startup gives you unmatched access to the company and its affairs. You get to see minute details that you could only guess in a public company.
Legal Insider Information
According to Jason Cohen, “They say the only way to consistently make money on Wall Street is to have insider information. Unfortunately it’s not a joke, and although it’s illegal (and people sometimes go to jail for it ), those in the know will tell you it’s the norm.” Remember the Martha Stewart Case anyone? Investing in an startup gives you legal insider information on a level that could send you to jail on Wall Street.
Simply put, arbitraging is buying in one market and selling in another while taking advantage of price differences. For savvy investors, startups present opportunity to buy low and sell high when the company is either acquired by a bigger competitor or it goes public through an IPO – which is simply a process designed for early investors to cash in on their investment.
Present at Creation
A startup is a creative force. At best, it is an innovative engine designed to push the limits of current dogmas. Startups investors are the grease that keeps this creative engine moving and they get to be present at the inception of such creative endeavors. America runs on innovation, startups thrive on innovation and startup investors fund such an innovation.
This article is based on an article first published on 2011 by Joe Alvarez Jr.