Keys To Private Placement Venture Investing

Key elements to understand about venture investing are:

	Private Placement venture investing can kick-start your retirement fund like no other tool on the planet.
	Private Placement venture investing can trap your money for 3-10 years before you get out those returns of 5, 10, 40, or 200 times your original investment.
	Or, over that same 3-10 years, just as has happened to certain mutual funds, you can watch its value go to zero with no way to get out.

The best way to make the really big money in venture investing is portfolio investing, just like the venture and investment banks do. Pick one and it is gambling, invest in 10 or 30 and you have a portfolio strategy that can net 30% to 300% or more per year, year after year after year.

A very large percentage of investors have their funds in "safe" stocks, bonds and mutual funds.

	Here is a recent headline, "Wachovia has lost 52% of its value in the last year."
	Or another quote, "I watched my $1 million retirement fund go to zero as Air Canada went bankrupt."

If you want safety there is no better way than FDIC insured savings accounts, certain CDs and US Government Treasuries. In recent times, on a good day these offered rates of 2-6%. Unfortunately much of this can be well below the rate of inflation. So that "super safe" deposit can actually be losing value every day!

A good way to try private placement venture investing is to invest in fully compliant offerings that are retirement fund compatible. If your funds are in an existing 401K or similar program you can roll all (or part depending on the plan) into a self directed IRA and then use those funds to buy these compliant private offering stocks. This can limit your tax exposure and is just one of many different ways, but one key is to look for fully complaint offerings. This indicates that the management team of the start-up venture is professionally organized and using professional advice.

How much should you invest? That depends on many factors but a simple key is to recognize that all private placements are high risk and you can lose some or all of your money. For expert advice seek out qualified financial advisors and perhaps even other venture investors. A good rule of thumb is much like the recommendation once given concerning buying a yacht, "If you have to ask what it costs to run it, you don't need one." These are high risk to get the high return; no risk means no high return.

	So invest only what you can afford to lose.
	Good rules of thumb I have heard include investing only 10-25% of your assets in these types of investments and use portfolio strategies.

What kind of returns can you expect? First figure that only 1 in 10 will be a winner. Of the remaining 9 maybe 2 will be OK, and the rest total losers. The greatest returns are in the early seed stages where the business is more of a napkin idea. This is the highest risk stage for any company. For example at this stage the stock may be only $0.10. If at the liquidity event of an IPO, an acquisition or a buyout, the price can be, say, $15.00 in year 5. That is 150 times your original investment. If you invested $25,000, the return is $3,750,000. Not bad for money you could have afforded to lose anyway.

What was once the domain of the few wealthy is now open to many others. This is the reason there are so many angel investors and angel investor clubs. While I am no expert, I can follow the path of the experts and learn from them. The biggest kick your retirement plan or your investment pool can get is from a wide portfolio of private placement investments.

I know of some who have 75% of their funds across a large portfolio of companies. These are individuals of high net worth and who enjoy the world of venture investing. You can pace yourself to be either highly involved or fully passive, your choice. The key is to invest in a portfolio across many different industries and build a catalog of companies at various stages. That way it is possible for you have one or two winners hit each year.

Private placement venture investors range in age from the 20's to over 100 years in age. I know a few founders who are in their teens. The only limit is your ability to invest funds you can lose. That is the key. While in the investment you will not be able to get your funds out until the liquidity event.

These are definitely high risk else you could not get these high returns. But high risk compared to what? Wachovia, Air Canada or many others I could list?

Copyright 2008 Donald C. Mann. All rights reserved

Don Mann is CEO of RiteMann Consulting Inc.; a company that helps businesses improve sales, profits, cash flow, people effectiveness and innovation, and is located near Wilmington DE. Don is also a private placement venture investment investor, finder and consultant.

He has delivered level-raising results in organizations ranging from start-ups to Fortune 100 by leveraging best practices across industries. This includes global businesses in financial services, manufacturing, chemicals, distribution and high technology, and well as governmental, military and community organizations. His results include developing and improving highly productive and lean organizations with improved innovation, sales and profits, more rapid responsiveness, reduced stress and renewed focus on customer delight.

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