P2P Financial Blog

Why Companies Such As Facebook Are Staying Private And How You Can Make Money Off the Trend

2011 is setting in motion the beginning of a new Internet tech boom—quite different than what was witnessed in the late-90s. Whereas the previous boom focused on hardware and search engines, this boom centers on social media and mobile devices. Whereas the previous boom occurred in the San Francisco Bay area in Silicon Valley, this one has seen new players pop-up in Manhattan in an area referred to as Silicon Alley. What is already defining this boom from the last is the lack of companies rushing to go public. In fact, companies like Facebook are acting hostile towards Wall Street, and want to retain greater control of their company and avoid some of the market volatility from going public.

For Facebook and Twitter, the need to publicly raise money, just isn’t as pertinent as it once was. With Goldman Sachs recently investing $500 million into Facebook, for instance, there isn’t a rush for a Facebook IPO. But with that said, some see Goldman Sachs’ investment as a move to get on the inside track of underwriting Facebook’s IPO in a few years. These rumors are surfacing as Facebook is encroaching upon the 500 investor mark, which requires it to register with the SEC, making company information publicly available. The logic behind these rumors is that if they have to make information public, they might as well have the company go public.

For these tech companies, remaining private allows their founders to instill and hold on to the values and ideas that made their companies originally take-off. And with investors looking feverishly for great ideas and companies to park their money—given lingering post-recession volatility—what is going to motivate Facebook and Mark Zuckerberg to give up control and take on greater market instability?

Tapping into venture capitalists and angel investors, rather than raising money by going public, seems to signal a trend by start-ups in the post-recession economy. But even if other companies like Twitter, Foursquare, and Groupon flirt with the idea of going public, if Google’s path reflects anything, the general resolve seems to be wait an extended period of time—as what was witnessed with Google who went public very late in the game. And for Google, as seen with Facebook, this wait created a backlog of investors looking to own a stake in their company.

With this surge in private equity investing, as people become more cautious of the stock market, sites like P2P Financial are becoming essential, helping accredited investors invest privately in budding companies and entrepreneurs. As most individuals don’t have the luxury or capital to have their money managed by investment companies—aggressively pursuing the latest and hottest company and trend—connecting with privately held companies through P2P is more and more appearing to be an essential avenue to look to invest.

For those interested in investing in the next wave of Internet companies, privately investing and reaching out to them could be one of the most effective ways to be part of this market. And as such, P2P is a great avenue in which to enter this sector early in a business’ lifecycle.

Category: Accredited Investors, Business Investing, Illiquid Investments, Investing, Private Equity, Real Estate Investments, Start-ups, Venture Capital | Tags: , , , , , , , , , Comment »


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