Analyzing start ups the way you would analyze an existing company will lead you down a road of missed opportunities

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When companies go public the bears come out in droves.  They talk about all the things that the company isn’t.  They tell you all the things that the company lacks.  They do this and they push the price down because they are right.  Often times you will hear them use terms like user growth, or moat, or cash reserves or the high amount of debt that these companies have and they are right about it all.  The problem is that this is only a short term strategy.

IPOs are Still Baby Companies

I liken an IPO to that of a college student.  Laden with debt, low cash reserves, no competitive advantage (moat), little experience, but their future is bright and ripe with opportunities.  The bears, your boss, your managers, will tell you all the things you lack, all the things you don’t have, so they can discount your wages to an amount that is profitable for them.  This is all a strategy to get something of high quality for little cost.

The Long Game

Long term, that college grad will be worth millions.  He can either work and rise in the ranks to upper management, he can leave and start his own company, the future is his.  The future is much more profitable than his IPO/Newly Graduated Years, but that comes with time, persistence, on the job training, wisdom, investing back into himself with more degrees and much more.  They were right that the 22 year old kid was worth little to nothing but the 45 year old is worth millions.

When you hear people discount a baby IPO company they might be right that it is worth little to nothing. But if you look at most charts of IPOs (excluding Facebook) they stayed low for about 10 years, maybe even lost some money and then they exploded into greatness.

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When we bought SNAP we were playing the long game.  Just like your career is the long game.  A lot of people think that life ends at 30 but if you play your cards right at 30 you should just be hitting your stride.  That is the time when, while you are still loaded up with debt, you have multiple degrees, years of experience and a better understanding of your lane.  Just like an IPO.  IPOs often times are finding their lane.  When they find that lane they double down and exploit that lane and competitive advantage.  You don’t have to have it all together and neither does an IPO. In time, your investment will pay off.

Be great,

Todd Millionaire

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