Investing $100 in a Start-Up (how it works)

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Investing in a start-up means:

- Owning part of a small biz.

- Having massive upside.

- Rooting for it to win.

Unfortunately, most people think you need thousands of dollars to get started.

Private Bets

Start-up investing often means betting on a private company.

A company that's not yet listed on the stock market.

People usually think doing this means you need:

- To take lots of risk.

- To be well connected.

- To have lots of money.

I used to think the same thing.

So investing in an S&P500 fund (includes the top 500 companies in the U.S.) was my only investment.

But as time went on.

I thought more about other ways to invest (and leaving 9-5 life sooner than later).

A common retirement plan:

20s: No plan
30s: No plan
40s: No plan
50s: Panic
60s: Panic
70s: Panic

A better retirement plan:

20s: Save & invest
30s: Save & invest
40s: Save & invest
50s: Enjoy
60s: Enjoy
70s: Enjoy

— JOHN HENRY (@thejohn_henry_) January 16, 2025

So I studied:

- Investing in real estate without much money (I didn't have much starting off).

- Investing in individual stocks.

- Investing in start-ups.

To my surprise..

I learned investing in startups begins at $100.

So 5 years ago I began an experiment:

To invest in 10 start-ups.

And to follow them closely and watch what happens.

Some of the investments were a few hundred bucks.

And some were a few thousand.

(money that wouldn't completely destroy my portfolio if things didn't work out)

I figured—

Investing in a tiny company that becomes a massive one like Apple was unlikely.

But one can hope.

Here's 5 things I learned investing in 10 startups (and what happened in the end).

Let's dive in:

1. The Ease

Many startups find investors online.

Popular websites to find these investments include:

- Republic

- StartEngine

- MicroVentures

I was surprised how easy these sites are to navigate.

It was pretty easy to find a company, invest and send over the money.

Investing in a private company is also called "private equity".

It's usually a few hundred or a few thousand people investing together in a business that's not yet listed on the stock market.

There's many websites that list startup companies looking for investors.

2. The Cost

Startup investments vary a lot.

Many online companies like the ones above have a minimum investment of:

- $100

- $300

- $500

Investor networking groups is another place to find new investments.

But the minimum investment amount is usually in the thousands.

Looking at the different investments listed online was easy.

But deciding what to invest in and how much to spend was hard.

Many startups on Republic and MicroVentures allow a minimum investment amount of $100.

3. The Updates

Startups give updates every 3-6 months.

I read most of the updates via email.

And watched yearly webinar updates with the CEO and other investors.

Updates cover things like:

- What the company is focused on.

- How many sales they have.

- How they plan to grow.

There's usually 3 things that can happen with a start-up:

1. The company goes out of business.

2. The company lists on the stock market.

3. The company is bought by another company.

Investors don't usually have access to the money they invested unless the 2nd or the 3rd thing happen.

A company listing on the stock market is often called an IPO.

4 of the 10 companies I invested in listed on the stock market.

Regular company updates keep investors aware of how their investment is doing.

4. The Product

Start-ups often share their product.

Investors may get discounts or free products.

A few of the companies I invested in sent me samples.

And others offered discounts.

It was cool testing things out.

Startups often ask investors for feedback on the product they create.

5. The Learning

Startup investing can feel like a mini-mba.

- Reading the updates.

- Watching the webinars.

- Asking the CEO questions.

Watching closely as the company founders work to build the company and brand was a neat experience.

Investing in a start-up can be a massive learning experience.

The Bottom Line

According to Startup Genome.

A San Francisco-based research company that studies start-ups.

Around 90% of them go out of business.

Here's what happened with my little experiment of investing in 10 start-ups:

Companies 1, 2, 3, and 4:

All went out of business.

Lost my investment.

Dang it!

Company 5:

Listed on the stock market.

The stock crashed 95%

Oh boy!

Company 6:

Listed on the stock market.

The stock crashed 90%.

Oh jeez!

Company 7:

Listed on the stock market.

The stock crashed 88%.

Comm'on now!

Company 8:

Listed on the stock market.

The stock went up 1,100%.

Now we're talkin'!

Then it crashed 80%.

Oh jeez..

Luckily, I sold this stock before it crashed so it made back money lost on the first 7 deals.

Company 9:

Still a private company.

Time will tell..

Company 10:

Still a private company.

Time will tell..

Following these companies has been a great learning experience.

But investing in an S&P500 fund (includes the top 500 companies in the U.S.) is still the easiest way to invest in my opinion.

An investment in the top 500 companies has grown 10% per year on average the past 30 years.

I hope sharing my little startup investing experiment is useful.

That's all for today.

See you next Saturday.