I have this theory. One that I strongly believe in. In fact, I have no doubt it’s the sole reason only a few of us get rich.
It isn’t intelligence, hard work or even skill. Of course, these things help, but the secret I’m about to tell you is much simpler. Let me explain.
Have you ever seen a movie and known how it would end after the first few minutes? Or one where every scene was easy to predict?
These movies tend to do poorly and never make much money.
But the opposite is true when you watch a movie that keeps you in suspense. That reaches a surprising conclusion at the very end.
It seems any film that is not predictable ends up being more successful.
Now, what does this have to do with getting rich? I’m glad you asked. You see, the more the mind must work to reach a conclusion, the better the outcome.
The same is true for investing.
The less predictable an investment, the bigger chance you’ll get crazy returns. Now that isn’t to say you should make blind bets. But if you can predict the somewhat unpredictable, you’ll make more money than most.
Legendary investor Peter Thiel asks nearly everyone he meets, “What important truth do you believe that very few people agree with you on?”
From there, he decides if the person is interesting (will be wealthy) or not.
In 2004, Peter invested $500K into a small start-up called thefacebook.com. 8 years later, Thiel sold all of his shares for $638 million.
He predicted what few others could.
Sure, you might not be investing $500K. But more athletes are emulating Peter and investing in start-ups every year.
But what is a start-up?
A business starting from zero to one is called the “start-up phase.” More specifically, start-ups are going after big markets, like gaming or social networks, not local stores or coffee shops (at the moment).
So, are they the future, should you invest in one, and how do they work? Read on to find out.
Why do start-ups need my money?
Getting investment means companies can spend money without having to make any first. They can use funds to help grow and realise their business. Here’s an example:
Imagine training but without the fatigue. The founders of Rezzil had a dream to make that possible using Virtual Reality.
Of course, building such a product would require a big tech team. That’s where investors come in. Knowing this technology could change the way footballers train, the founders used their network to pitch the idea to football stars.
Investors include Thierry Henry, Gary Neville and Michail Antonio.
They believed in their vision and “bought” a stake in the company. This allowed Rezzil to hire staff, spend money on marketing and eventually, make some money of their own.
Okay… sounds good, but…
What do I have to do?
When you invest, you own part of the company. Their journey is your journey, ups and downs included. You don’t need to do anything! But, through regular contact, you’ll learn loads about business. You’ll see behind the scenes of a business hustling to grow.
Owning part of a company naturally allows you to network. It can open the door to more investment opportunities that will help grow your portfolio.
As an investor, you may be public about your involvement or promote the product. For example, Michail Antonio has been actively promoting Rezzil and its benefits.
If the company gets more investment in the future, your share will be ‘diluted’, but the company will be worth more.
Now rather than owning a big slice of a small pie, you own a smaller piece of a bigger pie—still more pie!
How do I make money?
Unlike other types of investments, the money put into a start-up is no longer available to you.
You can’t just pull it out, like the stock market. Instead, you hope to get it back 10x back. This is not for a short-term, small gain but for a long-term home run. The risks are high, but the rewards are higher.
There are a few ways your money will come back to you, either slowly or in buckets of cash.
Money Maker 1 : If you own part of a company that makes a profit, they will be distributed to shareholders as ‘dividends’ (cash).
Let’s say you owned 20%, you would take 20% of the profits.
Money Maker 2 : If you own part of a business that’s acquired by another company. You get your percentage of the sale price.
20% of a company that sells for $5M, means a return of $1M.
Believe me, this happens. Sometimes in a BIG way. Remember Beats by Dre? They were killing it, selling millions of headphones each year.
Apple saw how they took a share of the market and wanted that for themselves. So, they bought the whole thing… for $3 BILLION.
Money Maker 3 : Alternatively, you might hit the jackpot by picking a winner – a business that goes public.
This means that the business is now listed on the stock exchange. When a company goes public, the shares you own convert to stocks and are typically worth a lot more. Remember our friend Peter? He made $600,000,000.
Start-up investing is a great way to be involved in businesses, as long as you take a long-term view. To make big money, you must look for the teams and ideas that will be truly game-changing.
The best places to find investment opportunities include AngelList, WeFunder, and FundersClub. You can also attend public events where startups pitch their ideas and look for investors. This is how Antonio discovered Rezzil.
The more you put yourself out there; the more opportunities will come your way. Being involved with Ball Business is a great start!
