Questions

I recently invested a five digit sum and it turned out to be one of the worst deals I ever made. I'm not a classical investor or VC and currently I don't have a lot of money to invest, but I really want to learn how investors/VCs think and act. This would help to avoid investing hard-earned money in junk projects and also to learn how great business opportunities can be identified, whether that is in the startup scene or in other avenues. I want to learn the metrics of investing into businesses and how to separate "wheat from chaff". I realize this platform is more for helping entrepreneurs, but apparently there are some people in here who are both, i.e. entrepreneurs and investors. So what is the best way to learn the art of investing in businesses? How do you become an investor? How do investors spot and analyze business opportunities? Any tips? Any books or websites out there?

Hi,
I've successfully made dozens of private investments into small businesses since 2008 and have only had one go bad. It was a second-lien mortgage deal brought to me by a broker. In general, my deals yield me between 12 and 25% APY and always have multiple 'ways out' should they go bad.

Being an accredited investor is a legal definition. You don't apply for this or go to school to learn it. The definition can change by jurisdiction. Where I live, for instance, one can be considered accredited if total net worth is over $5M, If liquid investments are over $1M or if your income is over $350K/yr.

Basically, a farmer with no mortgage would be considered an accredited investor or perhaps a dentist who had a few associates.

The rules about accredited investors are there to keep guys like you from making the investment that you did.

The problem with most investments being pitched is that they are for equity in startups. This is the riskiest place to invest one's money. The large VC investors that you cite in your question typically make many investments knowing full well that most will go bust. Their business model relies on having just one or two shoot to the moon. You probably can't afford this.

I recommend you start with small secured loans to local real-world businesses. Get your feet wet and educate yourself with respect to how you can manage various downsides.

My book, Invest Local, is all about this. It's on Amazon or your can get it from www.InvestLocalBook.com

On that site you'll also find hundreds of blog posts and links to over a hundred videos on local investing. Once you're ready to act, I also recommend my online course which is at www.LocalInvestingCourse.com

If you want my help, schedule a call with me after you've read Invest Local. It's only $10 and sometimes Amazon has it on sale for Kindle.

Best of luck.


Answered 5 years ago

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