Читать книгу Investing For Dummies - Eric Tyson - Страница 46

As I discuss in Part 4 of this book, you have several choices for tapping into the exciting potential of the small-business world. If you have the drive and determination, you can start your own small business. Or perhaps you have what it takes to buy an existing small business. If you obtain the necessary capital and skills to assess opportunities and risk, you can invest in someone else’s small business.

What potential returns can you get from small business? Small-business owners like me who do something they really enjoy will tell you that the nonfinancial returns can be major! But the financial rewards can be attractive as well.

Every year, Forbes magazine publishes a list of the world’s wealthiest individuals. Perusing this list shows that most of these people built their wealth by taking a significant ownership stake and starting a small business that became large. These individuals achieved extraordinarily high returns (often in excess of hundreds of percent per year) on the amounts they invested to get their companies off the ground.

You may also achieve potentially high returns from buying and improving an existing small business. As I discuss in Part 4, such small-business investment returns may be a good deal lower than the returns you may gain from starting a business from scratch.

Unlike the stock market, where plenty of historic rate-of-return data exists, data on the success, or lack thereof, that investors have had with investing in small private companies is harder to come by. Smart venture capitalist firms operate a fun and lucrative business: They identify and invest money in smaller start-up companies that they hope will grow rapidly and eventually go public. Venture capitalists allow outsiders to invest with them via limited partnerships. To gain entry, you generally need $1 million or so to invest. (I never said this was an equal-opportunity investment club!)

Venture capitalists, also known as general partners, typically skim off 20 percent of the profits and also charge limited partnership investors a hefty 2 to 3 percent annual fee on the amount that they’ve invested. The return that’s left over for the limited partnership investors isn’t stupendous. According to Venture Economics, venture funds have averaged comparable annual returns to what stock market investors have earned on average over this same period. The general partners that run venture capital funds make more than the limited partners do.

You can attempt to do what the general partners do in venture capital firms and invest directly in small private companies. But you’re likely to be investing in much smaller and simpler companies. Earning venture capitalist returns isn’t easy to do. If you think you’re up to the challenge, I explain the best ways to invest in small business in Chapter 15.