Late-Stage Investing Explained
Knowing When To Play Your Hand With A Bold Entrepreneur
When it comes to startups and entrepreneurs, it can be difficult to determine just when the right investment opportunity will arrive. We’ve seen the world virtually collapse before our very eyes in the span of just a few months. And now, in the post-COVID aftermath, you can expect businesses, startups, and entrepreneurs to put forth a new business model – one designed for a new world that we’re emerging into. With that in mind, how can you be sure that these new business models are viable? How can you be sure that these new business models are going to stick? You can’t! While that level of risk certainly goes hand in hand with being an investor, there is a way for you to take advantage of these new and innovative business models, and we’ve spoken about it extensively throughout this series. By waiting until a late-stage investment opportunity opens up, you can improve the success probability of your next investment.
Understanding the life-cycle of venture capital
As an investor in ventures, it is crucial to understand the different stages a startup goes through. FFF – friends, family, and fools or business angels typically back the entrepreneur’s first steps, followed by venture capitalists. VCs usually accompany a venture from the early-stage through its major revenue growth phase, which mostly includes breaking-even, and into its expansion phase. But this also means taking on major default risks. At the expansion stage, there is an overlap where private equity companies step in since the major default risk lies in the past. Stepping in a late-stage means reduced risk, increased predictability but still having the exit as revenue driver ahead.
PE companies make up the majority of late-stage capital and typically have a very exclusive investor circle. Breaking into those circles either needs a considerably large investment amount or a network which most of us only can dream about.
Late-Stage Venture Is Still Venture
For these new businesses to succeed, they’re still going to require venture capital. In terms of building, growing, and scaling, your investment can make a tremendous impact on these emerging businesses in the immediate future and over the long-term. There are several companies out there that have already made a name for themselves, but they’re still looking for more. This is precisely where you and your investment can come into play. With a product that’s already established, a brand that’s already recognized, a product that’s already been brought to market, and a customer base ready for more, you can rest assured knowing that your venture capital isn’t going to simply aid in the discovery of a new business model, but it’ll be used to fuel the growth of this business and build on the success it’s already had. Don’t forget about that study conducted by John Cochrane from the NBER, returns for late-stage venture investments can be six times higher than returns on the S&P 500. There’s an opportunity for a high return, and an opportunity to be the investor who took a risk on a new business model – one designed specifically with the future of business and economics in mind. Here at Stableton it is our mission to break down entry barriers to private markets and are giving access to exclusive late-stage venture deals with investment amounts as low as CHF 10’000. We work with individual investors, institutions, and investment professionals to deliver these outstanding opportunities. Contact us today to learn more about late-stage venture investing.
The Elusive Concept of Diversification
How "The Everything Bubble" has changed the rules of the game