Editor’s Note: Crowdability’s Matt Milner is back with another piece for today’s Money & Markets Daily. The former Wall Street exec, startup founder and venture capitalist is now helping ordinary people invest in — and profit from — private startups. Keep your eyes on your inbox for ways to follow Matt and his team at Crowdability into incredible opportunities. Enjoy!
Billionaire Offers 3 Rules for 10,000% Returns
Fred Wilson is one of the most successful startup investors in the world.
He was an early investor in private startups like Twitter, Twilio and Etsy — all of which went on to become multibillion-dollar publicly traded companies.
That’s why he regularly tops Forbes’ “Midas List” of early-stage tech investors, and is rumored to have a $1 billion fortune.
So today, I’m going to reveal three of Fred’s most important rules for startup-investing success.
Rule #1: Invest in Bits, Not Atoms
First of all, when you invest in startups, you should invest in “bits” not “atoms.”
In other words, rather than investing in businesses that produce physical products, you should focus on software-based businesses.
Why? Because companies that build physical products have higher operating costs!
Sure, some hardware companies will become successful. But statistically speaking, higher costs correlate to a higher risk of going out of business.
By investing in software companies, you’re more likely to back companies that will survive and thrive — and you’re more likely to earn outsized returns.
Rule #2: Love Your Losers
With this rule, Fred is acknowledging an indisputable fact:
If you want to put yourself in a position to earn big returns from investing in startups, it’s inevitable that you’ll back some “losers” along the way.
The thing is, if you build your portfolio properly and diversify your startup investments, your winners should make up for your losers many times over.
So embrace your losers, love them. They’re part of the formula that will lead you to success.
Rule #3: Keep it Simple
Fred believes that the best startups develop a drop-dead simple solution to a big problem.
As far as Fred is concerned, the more complex a product is, the more likely it will be to fail.
Based on Fred’s track record, I’d take this lesson as gospel…
Time and again, he’s invested in companies that others considered “too simple” but have gone on to become tremendously successful.
For instance, when Fred first invested in Twitter, people thought he was crazy. You see, unlike other online services that allowed people to publish book-length posts, Twitter allowed just 140 characters.
This created a limited user experience. But it turned out to be a perfect solution for publishing quick but important information.
In the end, it’s estimated that Fred made more than 100X his money on Twitter. That’s a 10,000% return.
That’s like turning every $10,000 you invested into $1 million.
Your Path to Startup Millions?
By following rules like these, Fred is now worth an estimated $1 billion.
The thing is, you could follow these rules, too — and put yourself on a path to earn market-beating returns.
If you’d like to learn more about what to look for in startup investments, check out our free “10 Commandments” report here.
In this report, we outline ten attributes we look for before making any startup investment.
Essentially, this helps us identify only the most profitable early-stage investment opportunities.
And it could help you quickly start building your portfolio of startup investments in 2024!
Happy investing.
Best Regards,
Founder
Crowdability.com