Why Can't I Invest In Private Companies?
Investing in private companies as an individual is next to impossible for most of us. As a normal person, typically you'd have to actually work for a private company that could provide you equity as part of your compensation package. Now, however, there are exchanges and brokerages looking to make it easier for people to buy and sell shares of private companies.
Companies like EquityZen, Forge Global and PEQX are in the (pretty new) business of making private market equity accessible to the typical consumer. However, there is one massive caveat to investing: you need to be an accredited investor.
What Is An Accredited Investor?
An accredited investor is one that the Securities and Exchange Commission determines is "financially sophisticated." To put an exact definition on what that term actually means, they have some defined guidelines to determine your qualification as "financially sophisticated:"
An income of $200,000 or more ($300,000 for joint income) for each of the last two years, or
A net worth of over $1 million, excluding the equity in your primary residence, or
A general partner, executive or director of a company that is issuing the securities, or finally
You can take a FINRA exam to obtain your Series 7, 62 or 65 license
Becoming an accredited investor opens quite a few doors. First, it allows you access to hedge funds, if you want to underperform the market each year and have excess cash to burn on fees.
Related: Inside Hedge Funds
Second, it allows you access to private equity funds. This is like investing with a hedge fund, but way, WAY more risky as these funds are comprised of companies that could go under overnight.
Third, you get direct access to shares of private companies via one of the companies I listed above.
So, with this, let's chat about the top private companies that I wish I could invest in right now.
1. Gymshark
The pandemic period of humanity will be known for many things. One such change, however, is the understated move from suits and formalwear to lounge wear and "athleisure" as employees moved to a remote-first model of working. Nowhere is this more apparent than in the stock price of the upscale-leader in pretentious athleisure - Lululemon.
Lululemon's share price over the past five years has skyrocketed, and shown massive appreciation in the last two years as people get more comfortable at home and in the gym.
Well, I think there's a comparable company hiding in the private markets, and its name is Gymshark.
Gymshark is a British company, started by current CEO Ben Francis in his garage in Birmingham, England. He started the company literally hand sewing new gym clothes after he couldn't find the ones he liked. After word spread and sales began, the company couldn't be stopped.
Gymshark is now sold in 230 countries, with over 900 employees around the world. They also sold a stake of the company to private equity firm General Atlantic, which now values the company at around $1.3 billion and climbing. Anecdotally, I live in a well-off suburb of Atlanta, and Gymshark has exploded. No more Nike, no more Adidas. It's all Gymshark, all the time.
Current Estimated Valuation: $1.3 billion
2. OnlyFans
Yeah yeah, get your jokes out now. Say what you want, but this company is an absolute monster. That's right, the "safe place" to sell nudes is my #2 pick on this list, but for good reason. Growth exploded from inception in 2019 to where they are today. They currently have over 170 million registered users on the platform, as well as 1.5 million content creators. This means they print cash faster than most other platforms on the market.
OnlyFans rose to popularity in the last few years after some big-name creators started waving around their paystubs. Here are the most notable examples:
Adult actress Bella Delphine stated she makes $1 million per month on OnlyFans
Danielle Bregoli, the "Cash Me Outside" girl from an episode of Dr. Phil, recently posted on her Instagram that she made $55 million on OnlyFans in the last 12 months
Despite these outliers, the average OnlyFans creator generates about $151 per month in revenue. Of this, OnlyFans charges a $7 per month fee to have a creator account, as well as taking 20% of all revenue generated on the platform. So how much does that actually generate? Well, thanks to leaked financial documents to Axios, we have some hard numbers:
So why isn't this my #1? Well, that's due to the drama that occurred last year when OnlyFans intended to take adult content off of their platform due to reported demands from their payment vendors. Despite rolling that statement back a few days later following massive creator backlash, if this company were to go public, it's very likely that this same instruction could be demanded again, killing any value proposition of the platform.
Current Estimated Valuation: $1 billion
3. SpaceX
Enigmatic entrepreneur Elon Musk has had quite the career. He started PayPal, cashed out, aggressively took over the CEO role at Tesla, made himself a mega billionaire, and now he's moved his sights to Twitter. Thow on top of all this the solar panel company Solar City, and you've got a busy man. But what if there was one more company, and it could be the most advanced?
That's right, it's time to talk about SpaceX! Founded in 2002, SpaceX was an early entrant into the bizarre billionaire game of privatizing space travel. Essentially, their mission statement was that federal governments are slow and not innovative, which has led to a stifling of creativity when it comes to space travel. Turns out, they're right!
SpaceX has made strides when it comes to cheap (relatively), easy to use, reusable rockets that are better than NASA's in pretty much every way. They kicked Jeff Bezos and Richard Branson's collective ass in the bizarre 2021 billionaire pissing contest, and they just set the record for fastest trip to the International Space Station ever. Their secret weapon, though? Starlink.
As Virgin Galactic is finding out, your main business model can't be seats on private space tourism trips like you run the world's weirdest safari park. There has to actually be a product here somewhere, which is where Starlink comes into play.
Starlink is Musk's vision for global internet based on a private satellite system, and unlike the STAR WARS Program, this one actually works. According to Florida Today, the most recent launch of the Falcon9 rocket to position a Starlink satellite is the 44th such mission, and that Starlink is "critical to paying for more distant journeys to the moon and Mars."
Starlink has begun selling its services to enterprises, with Hawaiian Airlines announcing last week that their passengers now have free internet access mid-flight thanks to Starlink. Musk has also philanthropically shipped emergency Starlink antennas to Ukraine, which has enabled "about 150,000 users per day" to have an internet connection. This allows the Ukrainian government to continue their infrastructure, according to Ukrainian official Mykhailo Fedorov.
Current Estimated Valuation: $36 billion
4. Stripe
Every month, when I get whatever revenue I've generated from this blog, I get a little notification on my phone that says "Payment received!" The app that sends that me that notification? Stripe!
Stripe is a payments processor for internet businesses, specializing in e-commerce. Imagine a combination of PayPal, Block, Quickbooks and American Express, rolled into one plug-in that an e-commerce company can quickly integrate into their tech stack. That's Stripe.
While they do offer customized plans based on the needs of the business, their traditional "Integrated" package charges a flat 2.9% rate per transaction, along with a 30 cent fee. In 2021, Stripe processed over $640 billion in total transactions. That rolls up to massive revenue number, to the tune of over $18.5 billion, a 125% year-over-year increase.
This company, founded by Irish brothers Patrick and John Collison, is one of the most highly anticipated IPO's ever. However, this company was already supposed to be public. Stripe intended to go public in 2020, then everything went to shit and they held off. Now, they're allegedly eyeing a late-2022 IPO, so we may get this one soon.
Current Estimated Value: $40 billion
5. Headspace Health
Last year, one of the first companies I wrote about as part of my in-depth "Stocks to Invest in" deep dives, I covered the telemedicine company, Hims and Hers Health. I'm personally invested in HIMS due to their strong product lineup, sticky products (you don't just give up erectile disfunction pills, right?) and monthly subscription revenue model. However, the most compelling part of that company to me was their intended expansion into the mental health space. That's where Headspace Health comes in.
Related: A Dig Into Hims and Hers Health
Officially formed in 2021 thanks to the merger of healthcare data company Ginger.io and mental health and meditation app Headspace, Headspace Health is looking to take meditation mainstream. According to their own data, demand for meditation and mindfulness lessons tripled during the pandemic, and it shows in their customer base.
Headspace Health has over 100 million monthly customers, each paying a level of subscription. They're in 190 countries, and even better, they're aggressively expanding into corporations. They've turned meditation into a B2B powerhouse, leveraging the existing relationships that Ginger.io made, expanding the subscription business into companies like Delta Airlines, Paramount and Domino's. I think the future is bright for this company that tells you to remember to breathe.
Current Estimated Valuation: $3 billion
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