Customers, Licensing, etc?

When you are going to invest into a company one of the most important things is to find out how they make money. Do they sell products directly to a consumer, or do they manufacture a product for wholesale? Do they market services? Is it strictly business to business? These are the things you need to figure out. If it is a real estate company then they have likely designed an investment vehicle that is probably pooled funds. So in this case it is the buying and selling of real estate for a profit that is the underlying business model being used.

Private investments are not as risky as you think

Most people do not understand about investing into a private company. There is very little information about it, and it is still a relatively small practice. Once a potential investor has been made aware of the opportunity they often go on to the internet and begin to do research. Most of the information you find is misleading. It is mostly government websites or websites that are simply regurgetating the same thing. They all claim to that private investments are considered high-risk, mainly because you don't know if the management is telling the truth and or if they will deliver on their promises. Technicially the other factor is lack of liquidity. This is why trust in the company and a solid clear exit strategy are the 2 most important factors to determine if you will lose all your money or not. Competition, product, etc etc these are all things that factor how much money you stand to make... but without the first two criteria being strong none of the market conditions matter because the company never really gets in the game. So to simply classify all private investments as high risk is absurd. It is simply a different landscape to navigate and if you are illequipped then yes they are perilous waters. Most of North America's wealth was created from private investments. Companies made trillions in profit because they had a solid management and with a solid game plan and they gained the trust of investors and the general public. Those who put their trust in companies BEFORE they have proven it are always rewarded handsomely.

What makes a private company a winner?

The easiest way to look at this is by looking at what makes private companies fail. The two main reasons companies fail is because they run out of money or they are poorly managed. Mainly it comes down to being poorly managed. The owners or decision makers at the top of the company are either crooks, idiots, or both. If a company runs out of money it is because management was not looking forward enough and their burn rate was probably too high. This is why it is important to MEET with the management in person. Yes this means flying to where ever they are located for a face to face meeting where you can get a better judge for their character, because after all at the end of the day that is basically what you are investing in. Find out where the money is coming from... revenues. Find out where the money is going... expenses. Keep in mind that private companies are not obligated to disclose their financials and they rarely do, so you have to decide if you trust them or not which is why I stress meeting them in person. Also try and talk to their customers. Doesn't hurt to ask.

Real estate investments

Real estate investments are one of the most common types of private investments. Once popular method of investment is pooled investment where you and other investor's funds are 'pooled' together so they can purchase a large piece of raw land etc that might later be developed then chopped up and sold off in units. Like all investments the first thing you want to know is what kind of return is projected and then what are the risks. Then you need to evaluate the people behind the business. This is usually the most important factor as people invest in what they trust and in what they believe. Usually when peopel think about investing in real estate they are considering actually purchasing a property with hopes to sell it in the future at a higher price then they paid. While this practice still does work, there are many types of real estate investments available today where you pool your funds together with other people or where company's have various instruments setup for you to participate in the profit, and of course also in the risk.

Why invest privately?

Why should you invest privately? Let me start by quoting a line from the movie "Wall Street":

"The public's out there throwing darts at a board"

When it comes to investing you have two options. You either invest in a publically traded stock or you invest into some type of private investment. Public stocks do not move up and down based on real solid fundamental business pratices and principals... it is all about trading and the trading happens based on news, speculation, insider deals etc etc. The stock market is vulnerable to many different things. You can invest in a solid profitable company and yet because of other worldy economical factors you can see that stock drop in value. Just take a look at what is happening now with US banks on the stock market.

Private investments are immune from the ridiculous emotional swings of the stock market. The value of a private investment IS based on solid fundamentals and real business practices. When you invest in a private company you are evaluating the company's business model. How long have they been around? Who is the management? How much money are they raising? What are they doing with the proceeds? What is their product? Who is the competition? How are they better faster cheaper etc? How is the investment structured? Will the company ever go public? These are the questions you are faced with when investing privately.

To give you an example of the power of private investments you need not look further then some of the biggest richest publically traded companies that were once private like Google, Microsoft, etc the list is endless. The best type of investment strucure for a private investment is usually a stock offering where you purchase shares in the company for 50 cents or $1 and then eventually the company goes public and the stock price climbs and climbs into double digits and well beyond. Wealth created from private placements and private offerings is huge. Most private investments are considered high risk high reward because of the liquidity issues that are associated with investing privately, but in reality risk is a relative term and it is up to you to do your own due dilligence and find a company that looks solid with a solid game plan moving forward.

What are private investments?

Private investments are all those investments that are not publically traded on a stock echange. Typically it is difficult to find the various private investments that are available in North America. You usually have to be lucky enough to be marketed to by them in order to hear about the opportunity. Private investments are usually available to sophisticated investors or accreditted investors. You can google those terms if you like but essentially it means you have a certain net worth and therefore it is understood that if you should happen to lose your investment you will still be able to put food on the table. Private investments can be stock offerings, unit offerings, bonds, LLC partnerships etc. Quite often many private investments start at $10,000 minimum. Most private investments should have an Offering Memorandum or a Private Placement Memorandum. Private investments typically have very high returns when you invest in company stock or shares and that company eventually goes public. Usually when you invest privately you are investing directly into the company itself vs going through a brokerage firm.