In 1977, Apple Inc. (NASDAQ:AAPL) co-founders Steve Jobs and Steve Wozniak approached Mike Markkula. They needed funding to manufacture the Apple II computer they had developed. At the time, Markkula was wise enough to invest $250,000 in the small company and become a one-third owner of Apple. Had Markkula held on to his 33% stake, he would be worth more than $185 billion today based on the iPhone maker’s current market value.
Harvard professor’s advice on how to spot the next Apple
Over the past few years, a number of tech startups have started offering small investors a chance to invest in the most disruptive and innovative companies. These startups are transforming into billion dollar enterprises at lightning speed. Virtual reality company Oculus Rift is a fine example. It was founded just two years ago, and recently got acquired by Facebook Inc (NASDAQ:FB) for a whopping $2 billion.
What does value investing really mean? Q1 2021 hedge fund letters, conferences and more Some investors might argue value investing means buying stocks trading at a discount to net asset value or book value. This is the sort of value investing Benjamin Graham pioneered in the early 1920s and 1930s. Other investors might argue value Read More
Elizabeth MacBride of CNBC says new federal regulations would open the door wider for small investors to become angel, startup or microventure investors. That means investment opportunities that were previously reserved for well-connected and wealthy are coming your way. Now all you need is learn how to spot and invest in companies that could become tomorrow’s Apple Inc. (NASDAQ:AAPL).
Picking a winner is really hard. You need to be able to recognize a revolutionary idea, evaluate its potential for success, and then have some luck that a major scandal or an act of God doesn’t destroy the company’s fortunes. Harvard Business School processor Clay Christensen offers some insights into what kind of startups can succeed. Clay says, for a startup to succeed, it must create a huge new market where there wasn’t one before. Or it should find a new way to become more profitable serving the least attractive customers in an existing market.
Companies like Apple come along only a few times in a generation
Startups that aim to beat a firmly established incumbent by building a better mousetrap have little chances of success, says Clay Christensen. But remember, not every innovative company is a small startup. Many innovative companies are already listed on the stock exchanges. So, you can take the old-fashioned route by buying the stock of a company with truly disruptive technology, and holding on to it.
MacBride cautions that you should be skeptical while investing in innovative companies. That’s because businesses that innovate and succeed like Apple Inc. (NASDAQ:AAPL) come only a few times in a generation. Therefore, invest in them only as much as you can afford to lose.