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Introduction |
| Now
that you are a hotshot with investing you
are probably wondering what comes next. The
next step after investing in stocks, bonds,
and all those other good things is investing
in companies before they go public. Another
step is investing in companies when they are
initially offered to the public(IPO). |
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Venture
Capitalism(VC) |
| This
form of investment is a necessary part of a
growing business. Most companies need funds
in order to grow. These funds come from
various sources, products, loans, and also
venture capitalists. More and more people
are willing to become venture capitalists
due to the high returns associated with it.
The way that it works it that when the
venture capitalist invests in the site he
obtains a large share of the company. When
the company becomes and IPO the stock price
of the company will go up. Therefore it
causes the existing share prices to increase
at a rapid rate. There is a catch however,
that would be that in order to invest in the
companies they usually require a large
amount of money to be invested in them. This
is discouraging to many small investors who
are attracted to the allure of venture
capitalism. There are companies out there
that small investors can join with to become
venture capitalists. The way that they work
is that they pool the money of investors
with the same interests and invest in a
company that encompasses those interests.
This all sounds good but there is a
definite downside to VC&
Sure this all looks glamorous to investors however
all that you ever hear about are
the companies and the people that succeed. This
crowd represents less than 20% of the
companies that receive VC funds. Being a
VC is a very risky investment that cannot be
handled by some investors. This risk is
on top other stocks that you most likely have
in your portfolio. This volatility may
not be acceptable for most people. s
portfolio. Another problem that VC
encounter is that when they invest in a company
it may not become an IPO for a few years,
and even their becoming an IPO isn. t
guaranteed. |
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Initial
Public Offerings(IPO) |
| An
initial public offering is the first time a
corporation offers shares to be traded
publicly. Companies usually build up over
the years to become an IPO. Before these
companies come out to the public their
shares are usually owned by employees,
management and if the company is family
owned parts of the family. The time at which
a company needs more funds is the point that
they decide on whether to take out a loan or
to sell stock. Usually "going
public" is much less expensive for
companies than taking out loans. |
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Choosing
an IPO |
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companies
potential for growth |
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look
to see for steady rising profits |
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growth
plan and previous earnings |
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if
a product or discovery the company
comes out with will bring price of the
stock up |
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find
out about what they exactly do |
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find
out about their competitors. |
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Risks
that are involved |
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risks all have to due with the amount of
research you do for the company. The quote,
"Ignorance is bliss" does not
apply when in the investing world. If you
are ignorant when investing in an IPO, or
even any company, you may end up losing what
you put in. Here is what you should consider
looking more into when investing in an IPO. |
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proper
management in the company |
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business
plan is logical |
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would
they be able to succeed with their
plans |
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does
the company have enough capital |
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will
small drops in the stock price set the
business back on a large scale |
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is
it even appealing to other investor
that are necessary for the company to
succeed |
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