If you factor the risk and reward, obviously startups are very very high risk
but the reward is just so much greater. So today on Dumb Money, we're gonna talk
about why investing in startups better than investing in stocks.
We're self-trained investors with over 30 years experience investing in and
trading stocks. Additionally we're one of the most active investors of early-stage
companies in the state of Texas. We're really just three regular guys who have
had better than usual success investing both in stocks and in startups. Today
we're teaming up with Joseph Hogue, an actual trained CFA. He also happens to
have a very popular YouTube channel called "Let's Talk Money" and he's gonna
be talking to us about the other side of this argument. That's right guys, I've
been an analyst for venture capital and equities. I love the big money in
startup investment but I gotta say I think I like stocks for the win here. In
my video, I'm gonna be revealing 5 questions every investor needs to ask
themselves to decide stocks versus startups. So be sure to watch to the
end so you can hear Joseph tell us about why stock investing is better than
startup investing. If you enjoyed today's episode please let the YouTube audience
know by smashing that like button, if you haven't already subscribe and also hit
that bell to ensure that YouTube notifies you of all future Dumb Money
episodes.
We're exploring today our reasons that startup investing makes more sense yeah
and it has absolute advantages over trading and investing in stocks what I
like about startup investing is that you have an opportunity to actually
influence the companies in their outcome you get to actually change the history
of that company for me it's not just helping them but if you are in a
situation where the CEO is going in a direction that you disagree with you can
actually say something and you can change the direction of the company
we've replaced CEOs before sometimes they'll reach out to us and cuz they
know that we have certain expertise and they'll say like hey Jordan I need help
with this or hey Chris I really need help with this
it was startups that's kind of I think what we do best and it's nice to be able
to add value to actually be able to bring value to the investments it's hard
to have a lifetime changing event trading stocks where what startups you
can and we have multiple times have had life-changing investments in startups
all three of us are here where we are right now because of startup investing
no doubt right I would say that that's why we have to say that startup
investing is better than stocks because we've done better it's startup investing
bands getting a 35x whatever it is for TX return on an investment that doesn't
happen often investing in stocks even when you're using leverage which we do
with options but when you factoring in risk and reward when you're leveraging
it makes the risk go way higher almost to the level of startup where you can
lose all of your money very easily in a highly leveraged option investment in a
publicly traded stock it's very unlikely that you're going to buy stock and the
company is going to go out of business and your stock goes down to zero alright
let me throw a third reason why investing in startups I think is more
interesting than trading especially in 2019 there are a lot more opportunities
investing in startups and trading stocks because so few companies go public now
they're so large by the time they go public listen our best investments or
when we are identifying change changing culture changing technology changing
consumerism and then we're chasing where we think there's an opportunity to
monetize that change and more often than not we're able to find that opportunity
in a private company instead of a public company and a great
example we'll see if it works or not is called the cauliflower pizza dough
company we invested in recently impossible foods which is private you
made an investment in possible foods and before it even went public you're having
an opportunity to sell at what two to three times your money almost three
times my money in a few months most of the time we're not able to find a public
company where we can monetize our information we can almost always find a
private company and there are various there's a range of what a start-up is
from the idea and a founder who's looking for his first angel investment
to the almost about IPO like we invested in embarassingly lift and rework and
almost in jewel I was not almost on that one
in the 70s you know like a fifteen million dollar company would go public
that doesn't happen today with all the regulation it can't happen a company
doesn't go public until they're like what like a 300 million dollar market
cap it at least how great it would have been to be alive and investing back in
the seventies you can get access to anything with the exception of the three
percent commission spot three to five percent commissions in and out of every
trade like and now we pay nothing but you also get less upside right because
the companies have gotten so much bigger before they go public
way less upside which is my biggest pet peeve I can't stand companies staying
private because it concentrates the wealth but that's why they're doing it
because of all the regulations that have come out of all the accounting
regulations to protect investors tech to investors whatever protecting well or I
is what they're doing so but that leads into the fourth reason way less
competition investing in startups than investing in public markets most of the
startups that we invest in especially here in Texas if we want to invest we
can invest and we're one of only a handful people that have accessed that
company and have the ability to invest because the investment minimums with a
start-up or usually 25k at minimum right and how many people can throw $25,000
into investment relative to how many people can spend a hundred bucks on
stock weren't able to get in with significantly less competition in terms
of investors competing with us for deal flow and especially with local startups
then the 3,000 stocks or reality is a few hundred stocks
everyone ends up trading and the price for those stocks is determined by the
open market and in startups it's kind of negotiated there are more inefficiencies
with the pricing of startups than the pricing of public securities so there's
more opportunities for people like us that have access to actually arbitrage
those efficiencies would start up the sort of investments it's tougher way
tougher with public stocks when you have millions of people and banks doing
analysis on how much this should be worth and everyone racing for this and
like real-time reaction to market information absolutely and that market
information actually exists in stocks but you only know what's been made
public you don't know the CEOs personality you don't know the strengths
and weaknesses where in startups that plays a lot into the success of the
company fifth reason the sense of personal connection the relationships
that you develop investing in startups getting to be on that journey from a
founders dream actually seeing that the root of fruition all the way through
this successful exit right is there anything that tops that as much as we
like to make money I'd love to see other people make I can't believe I'm saying
this five great reasons why investing in startups it is better than investing in
stock even though we love stocks and we are way more active in stocks than
startups but if you told me I could never trade a stock again I would be
unbelievably depressed maybe in perpetuity for us my life so I'm glad we
don't have to make a choice between the two
listen there's never been a bad time to start and invest in a great company we
all agree there's it doesn't matter whether or at the peak of a market or
the bottom the market there's never a bad time to invest in a great startup so
those are our top five reasons of why we think startups are better than stocks we
obviously invest in both we're not professional investors we're amateurs or
professional amateurs what's the prosumer version of what we are we are
the prosumer my end camcorder find the professionals doesn't have any other job
right as always so technically this is what we do so we are professional
investors I'm a professional investor we're semi-professional investors our
buddy Joseph Hogue he is an actual professional investor he's a CFA he's
the he's the real deal he's also a legit YouTuber and he right
now has a video that has the exact opposite of what we just said guys I
just posted that video with the five critical questions that every investor
needs to ask five factors to help you make that decision between stocks and
startup investing this one is epic so look for that link in the video
description below as soon as I'm done watching this video I'm gonna watch that
one I want to see what he has to say this is our first collab this is very
exciting for us at Dumb Money. If you like the idea of us collabing with other
YouTubers, experts in the space, let us know we'll do more of them and if this
video is useful to you be sure you hit that thumbs up button
and talk to us about what you think about startup investing versus public
market investing yeah what do you guys prefer that's gonna do it for today be
sure you guys subscribe to see every video we make there's a bell that
sometimes works YouTube loves it when you hit those buttons we're Dumb Money...
we'll see you next week.