Thursday, July 24, 2008

lakky505

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So, you are looking into ways of making money on the Internet? Aren't we all, and it seems very hard to find the winning strategy. I have a recipe for you.

Everyone trying to make money online is trying to make something, with nothing. This will never work for obvious reasons if you can look at things objectively. You have to have something to be able to make something. Simple as that. If you invented the Ipod, great, you are a millionaire 100 times over (they just sold their 100 millionth copy).

If Ipod was created by a new company as their first product, who would make the most money on the short term scale (less than 12 months)?

The venture capital companies or business angels that put up the core investment in the company to realize the product. Every company with a strong product must capitalize their company to get the first product on the market, and the VC companies makes a ridicules amount of money on seed funding and startups because they are the source of funds for the entrepreneurs with the product, the next cool product. The next 100 million dollar product.

So, am I saying that you have to figure out the next super cool product or service? No. I am saying you should try to get in on the VC level with your investments, since they have the largest leverage on the capital. If you buy a stock today, for $10 a share, and if it went up to $12, it would be great, but what if you bought the same stock for 30 cents and sold it for $12?

Well, it is not easy to be a VC, since it requires access to a lot of money, money we first must earn. But what if you got a chance to add a small investment to a pool that would do seed and startup funding, and take the gigantic percentage increase from the stock on your money directly?

Let's assume there is a company trying to get a funding of $3,000,000 for getting the product out there, and selling 49 percent of the company's equity for 30 cents a share, would you take the risk of a 3000 dollar investment to own shares in that company if the product and idea is good?

I would. And I did. On one particular investment I went from an investment of $4000 and made the exit at the IPO (when everyone else was getting in) I sold my shares for $2,5 each, and I bought them for 10 cents. Please count the percentage on that.

Yes, it is astronomical.

But how did I dare risk $4000 for a product that was only on the drawing table? It was easy for me, knowing the power of Internet and the marketing waves on the Internet, I saw an opportunity that was so good it had problems to fail. Well, you see, if the product is good, it will sell, and by understanding the product everyone that can think for a minute can take the right decision. Risk is higher but the reward ratio is much higher if it works.

Did you know that over 30 different VC companies turned Skype down, they didn't believe in the product. Skype had a very tough time getting the funds to develop the first versions. Skype was sold to Ebay for an astonishing $5 BILLION. What do you think the down turning VC's said afterwards?

Skype is a hype, it will blow over. It is crazy how much power the VC's do have since they are controlling the funds, and they do know each other so they talk to each other. The VC behind the Skype funding, paid about $1M for 30 % of the Skype Corp, and guess if they where happy when Ebay bought it.
But isn't there a significant amount of risk involved in early investments in companies? Sure, risk is much higher than if you left the money on the bank, or on the stock exchange. But you are looking into a way of making money, and to be able to make money you have to risk certain money to be able to succeed. Risk is somewhat similar to any business; will they make it? Will the product sell? Will it boom? What happens if it just sells and not booms?

The ground rule is, how many ways is it possible for me to make money in this particular investment? Is it all depending on one thing or do they have multiple income streams?

What about track record? They have none, the company is new, remember. It is all down to the product and its market. Why is everyone talking about track record anyway? It is of course risk reducing to get in at a later stage, but reward ratio is then lower. I like the risk, makes it fun, and sure, I would not bet my house, only small money, less then $10 000 for me. If you cant afford to loose the investment, do not do it.

Think of the product, is the product a good idea? Is the market good? If so, then it is just a matter of your own financial capacity. You have to have SOME money in order to make an investment. A few thousand dollars should do it. And yes, if you only make one investment the first time, you have an exciting period ahead, when the progress reports are coming in, since you are a shareholder you will get information updates regular.

If it pays off good, if you can sell the shares for $3-5 each and bought them for less than 50 cents, please save at least 50 percent of the profit before entering new deals. This is how you get rich over time. There is no getting rich quick thing, it all takes a lot of time and a lot of sense. Do the math and do not get in heavy (with all your got), save the profit and get a less risky investment with some of the profit and let some of the profit go to new equity deals in new companies with exciting products, on the right market.

I cannot recommend anything to you, but I can tell you the truth, it is impossible to make something out of nothing. And when it pays off, it is fun, you feel very light, very energetic and the sunshine around you makes your day beautiful.

If it doesn't pay off as planned, well you tried, and you do have the shares, most companies will come around so at least you get something back. And there are always new deals to consider. Do you remember the sum Mr Donald Trump was owning 99 banks when he crashed? It was billions of dollars. Where is he now? Oh yeah, he has a few billions in net worth again, and boy that man is a genius, or is he? What did he do? He took risks, thats all what it comes down to, take the right amount of risks and capital at stake, to do the deals that pays off the highest.

There is no secret here, it is common sense, risk and some money at hand.

Are you up for it?

There is even an opportunity for you to get shares, no money down, shares for free. Does that sound interesting? But you have instead of money down, work to do as a reseller instead. Your time for free shares.

Astonishing.
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