Personal Finance Question
How can someone invest in private companies such as Facebook?
I'm just curious if there are different routes you can take in investing. Say I have a large sum of money and I just want to pump it into a company I truly believe in. Do I literally knock on Facebook's door? Please share your experiences.
Thanku! -Simon
Best Answer
2270 points
Oldman answered 6 months ago …
There's an indirect way to buy into private companies: buy the investment groups that take them private: Terra, Loews, Markel, Apollo, etc., are investment pools that buy up and re-monetize companies. These are different from "busines deelopment companies' that underwrite or create loans for business expansion. Some of the investment companies' share prices are pretty high, because, like Berkshire, they just accumulate assets ... and most pay little or no dividends.
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618 points
DaveDiggz answered 6 months ago …
Sorry Simon, it doesn't quite work that way. You have to be an accredited investor to invest in a private company (a net worth of $1 million or an annual income of $200,000)...and then, if it's a "hot" deal, as Facebook would be, then it's very unlikely you'll get a shot at investing.
Your best bet is to seek out stocks that stand to benefit or lose from the success or failure of these private companies and buy or short those stocks, respectively. Or, just go out and start a company of your own :)
683 points
7million7years answered 6 months ago …
The short answer is that you can't ... that's why they are called PRIVATE companies.
However, if you have (a) lots of money to invest (b) happen to know somebody starting a private company (c) who needs cash to grow, then you just MAY be able to invest by approaching the owners directly or through an Investment Banker or some other introductory agent..
This is called Angel Investing or Venture Capital ... just remember this:
Even very astute VC's expect to LOSE their investment in 7 out of 10 companies that thye invest in ... they expect to only make their money back on another 2 ... that leaves just ONE that will take off like a rocket and make it all worth while.
Question: do you have what it takes to work on a one-in-10 shot with your hard-earned cash?
I do, but have only invested $150k; $150k; $50k in three early stage companies (with another in the planning stages) that I believe strongly in ... yet, that represents a TINY portion of my current cash-in-bank (not even counting my other businesses, real-estate and investments)!
