Investing in a Business – the Best Kept Investment Secret

Investing in a startup company has often been considered and said to be a high risk investment. I completely agree with those who say that WHEN the principles of a company have not met or complied with SEC rules, regulations and laws concerning the offering of equity in a corporation or LLC. I know of private investors when approached by a business owner with an investment proposition and provides the prospective investor with a business plan or executive summary to review and do not have the proper investment memorandum required by the Securities & Exchange Commission (SEC) a “red flag” is raised immediately.  A knowledgeable private investor is aware that a company that is in violation of security laws could be shut down and the officers and directors could be fined and/or prosecuted that could result in the collapse of the company and loss of all investment dollars. Nearly every state has “Blue Sky” laws in place that could allow the prosecution of the principle officers and directors who have not complied with either the federal or individual state laws.  That sophisticated investor will simply say, “I don’t think this is what I’m looking for.”

What about those individuals who are in a startup mode or have already an existing small business and requires funding and who knows the laws and regulations and complies with them by having prepared a Reg D private placement offering? They are worthy of investigation and due diligence as a possible investment. Those are the companies that YOU want to pay attention to as a viable business investment. Some of these companies have tremendous potentials and could be an investment “home run.”

There are two commonly used Reg D’s. The Reg D 504 is used when the offering does not exceed $1,000,000 while the Reg D 506 is for offerings over $1,000,000. Everything about the offering is found in the memorandum that is provided to the investor for review.

I receive telephone calls from individuals who have discovered the secrets of Reg D 504 private placement offerings in particular and the stories they tell are truly amazing. One such person indicated that he only will invest in Reg D 504 offerings and will invest in as many as 8 offerings per year at an average investment of $50,000 for each offering and his returns are averaging through both dividends and buy outs in as little as 24 months a 4 time return on investment. He continued to tell me that he’s a retired Wall Street stock broker and discovered private placement offerings while there. The more he studied the opportunities the more interested he became in this often overlooked investment method. He specifically focused on startups because occasionally he could acquire the equity at either a reduced price or a 2 for 1 deal.

Further discussing how he benefits I specifically asked him about his returns asking him to confirm what he had told me in realistic numbers. He told me that out of a $50,000 investment if he could acquire the 2 or 1 stock deal, he would actually exit the investment within 24 months with $400,000. I asked him, “You are telling me you invest in up to 8 deals each year and on average earn over $3 million from your investments?” He said without hesitation, yes!

This is why I often refer to a private placement offering “The best kept secret in business investing.” I’ve spoken with many individuals over the years that have discovered the secrets, opportunities, benefits and advantagesof investing in a private placement offering.