Investing in tech unicorns can be just as exciting as it is risky, but it can also be difficult for the average techie to figure out where to invest if they want to invest in unicorns. Unicorns are privately held companies with a valuation of more than $1 billion.
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Because they are private, it is difficult to make connections with these tech unicorns, but there are ways to invest in them without too much of a hassle.
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How to invest in tech unicorns
One of the main issues for techies who want to invest in unicorns is making the connections necessary to do so. The venture capital market tends to be very tight, and it can be difficult for outsiders to break in. However, by investing in a fund that invests in tech unicorns, you solve multiple issues.
You may already be investing in tech unicorns without even knowing it. Some 401(k) funds and mutual funds invest in start-ups, which includes both early and late-stage funding rounds. Sometimes those late-stage rounds are called "private IPOs."
Recently some mutual funds have increased their exposures to private companies because they don't want to miss out on the growth that occurs before these startups hold their initial public offering. Many mutual funds are active in the startup space, although a few stand out more than others because of their size or the percentage of their assets they put into private startups.
One of the biggest players in the industry has been T. Rowe Price and its Growth Stock Fund. According to CNBC, it had more than $376 million invested in three of the top 10 companies. The fund invested in Flipkart, Airbnb and Dropbox. Flipkart is still private, although it could go public at some point.
Airbnb has been having internal discussions about holding an IPO, according to news reports. Dropbox has already gone public since the CNBC article was written.
Another fund that stands out in the startup space is Morgan Stanley's Inst Mid Cap Trowth I fund and Inst Global Dscvry A fund. Both funds have moved aggressively into venture capital with about 4% to 5% of their funds invested in startups.
Fidelity also invests in tech unicorns. The Fidelity Contrafund invested in Uber, which has now gone public in a failed IPO. It seems like those who invested in the company as a startup may have been better off than those who waited for it to go public.
One of the biggest problems with investing in tech unicorns is that it can be difficult to tell the difference between a company that only claims to have massive opportunity for growth and one that actually does have huge opportunities. The good news is that if you invested in a fund that invests in startups, you have someone doing the research and screening for you.