On Thursday afternoon, June 17, 2010, an email was sent to a group of investors about an early stage company raising capital.
There wasn’t much to go on.
It simply read: UberCab is “everyone’s private driver. We’re solving the taxi scarcity problem with on demand private cars via iPhone and SMS.”
It informed the investors that after two weeks in the app store, the alpha set of 10 drivers was doing 10+ rides on weekend evenings in San Francisco.
That was it.
Out of all the investors who received that email, only five of them invested in the seed round. Just five.
Those who didn’t missed out on mind-boggling wealth. It has become a decision that they’ll regret for the rest of their lives.
The company, of course, was Uber.
It wasn’t the Uber we know and use today. Back then, it was just an idea – an experiment designed to figure out if an entire industry could be disrupted through the use of technology.
It was a chance to empower a product or service that could do something faster, better, and cheaper than anything else available.
It was day one.
And there is no better time to be an investor. Yes, the risks are much higher. But with a portfolio of “day one” companies, all with incredible potential, the winners more than make up for those that don’t survive.
With the right strategy and time horizons, the returns that come from investing in a disruptive “day one” company are simply life changing. They can result in generational wealth.
Generational Wealth From a Small Bet
Take this seed round investment in Uber as an example of how transformative day one returns can be…
Cyan and Scott Banister invested in Uber’s seed round. Their $50,000 investment turned into $248,275,800 at the time of Uber’s initial public offering (IPO).
Naval Ravikant invested $25,000 in the same round, which grew to an incredible $124,137,000.
These returns generated 4,965X the original investment. That’s enough to transform…
a $100 investment into $496,500
a $500 investment into $2,482,500
a $1,000 investment into $4,965,000
Just $100 can grow into nearly half a million dollars. And $500 can grow to nearly $2.5 million.
That’s all it takes.
There is no need to invest $50,000 or $100,000 in each investment to generate life-changing returns.
That is why investing at day one is the single best way to set ourselves up for the retirement of our dreams and give our families financial independence for generations.
But for most investors, these kinds of deals have been held out of reach for far too long.
The Rules Don’t Make Sense
As most retail investors are well aware, not just anyone can access private deals. Normal investors have been excluded from investing in private companies because of the U.S. Securities and Exchange Commission’s (SEC) accredited investor rule.
The rule says that only accredited investors can invest in private deals. And it defines an accredited investor as someone with a net worth greater than $1 million, or an annual income greater than $200,000.
Many of us have held our breath, hoping that the SEC would reconsider these rules. In fact, in December 2019, it announced it was going to release new language around its accredited investor definition.
We hoped that its updates would lead to a more inclusive definition, opening the door to more retail investors.
Sadly, that didn’t happen.
The SEC did in fact change the definition… But all it did was add people who hold certain securities licenses to the list. As an example, stockbrokers are now considered accredited investors even if they do not earn more than $200k.
Talk about a disappointment.
The SEC expanded those who can access private deals to a larger subset of “insiders” who work in the financial services industry. For most of us, this change meant nothing at all.
And the rule doesn’t make any sense in the first place…
Think about it – the federal government is perfectly fine with nonaccredited investors going to the casino and gambling their paychecks away. Why can’t those same people invest in the most promising private companies too?
I do tip my cap to SEC Commissioner Hester Peirce, who spoke out against the accredited investor rule.
And I love what Peirce had to say about this issue: “Why shouldn’t mom and pop retail investors be allowed to invest in private offerings? Why should I, as a regulator, decide what other Americans do with their money?”
She went further, saying, “A person’s economic status may demonstrate an ability to withstand losses, but it certainly does not demonstrate financial sophistication.”
And the problem can all be summed up with her final remarks: “[Regular Americans] cannot use their experience, local knowledge, education, and investing acumen to build a balanced investment portfolio, to maximize the nest eggs they pass on to their children, or to invest in their communities.”
But there is a bright silver lining…
The Day One Summit
Just this year, we saw an important change in private investment regulations. It is a change that will have a profound impact on the industry. And for the very first time, everyday investors will be able to invest in quality “Day One” companies.
I’ll be sharing the full story during my Day One Summit. It will take place on Wednesday, November 17, at 8 p.m. ET.
If you’ve been waiting for the opportunity to see generational wealth through investing, then please make sure to attend.
I look forward to seeing you there.
Editor, The Bleeding Edge
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