Dear Startup Investor,
Neil here. Happy June!
The weather is warming up, we’re getting ready for the summer, and we’re almost halfway through the year.
Among the crazy short squeezes, new SEC regulations, shaky crypto market, and more… it’s been a wild year already. And today, I want to dig into another massive trend that’s taking 2021 by storm.
It has to do with tech companies, the sweethearts of the private investing world. They’re raising more money than ever before… but it might not be how you expect.
Let’s talk about it.
The Private Equity Buyout
Yesterday, news broke that cloud-based software company Cloudera is being acquired by private equity firms Clayton, Dubilier & Rice, and KKR in a massive $5.3 billion deal.
If you’re familiar with Cloudera already, you’ll know that it’s currently a public company. When this acquisition goes through, Cloudera will exit the public market and become private once again.
As angel investors, we’re always focused on what companies are going public. We’re hyper-focused on the next biggest IPOs that will kick us back the best outsized returns.
Of course, that’s for good reason. IPOs have historically handed early stage investors a fortune… much more than they’d ever see had they invested publicly.
But this process is kind of like the opposite of an IPO. It’s called a private equity buyout. Essentially, it’s when private equity firms and investors acquire a majority stake and take control of a once-public company.
Usually, these companies are undervalued and/or underperforming on the stock market. In Cloudera’s case, analysts have said that the company is undervalued on the public market, especially for a cloud software company.
The goal of a buyout is to take the company public again later down the line for an impressive profit.
One of the Year’s Biggest Tech Trends
Cloudera isn’t the first company to go through a private equity buyout this year, and it’s definitely not the biggest buyout either.
In April, for example, security software company ProofPoint was purchased by Thoma Bravo in a $12.3 billion deal, the largest private equity deal of a cloud-based software company.
Those are just two examples. At the end of the day, there’s a mind-boggling amount of cash pouring into tech companies from private equity firms.
A report from Ernst & Young even reported that 24% of private equity deals in 2020 went to tech companies, and analysts have predicted that the space will remain healthy in upcoming quarters.
The Common Thread
But what’s the common thread here? Despite what’s been a rocky year, tech companies aren’t losing steam just yet. I doubt they ever will, especially in this sector. Here’s why I’m confident.
That private equity companies are willing to pour billions of dollars into cloud-based tech companies only validates the space further. Even though these companies have underperformed on the stock market, it’s clear that private investors have enough confidence to take a chance, buy them out, and built them back up into powerhouses that can crush the public market (and create major profits for their investors).
Now of course, tech extends beyond the world of angel investing. There are plenty of opportunities to dive into the tech world right now, especially while you wait for your angel investments to mature.
In fact, if I had to point you in one specific direction, I’d point you to my friend Michael Robinson. He’s a wizard, if I do say so myself, who’s got the scoop on all of the latest and greatest tech trends on the market.
He’s dedicated his career to bringing those kinds of opportunities straight to you. Michael’s readers have access to some of the timeliest and most comprehensive reports out there, and each one can help you make the best decision for where to put your money in the tech world – if you choose to do so.
Here’s a report you can check out right now. It’s all about blockchain, one of the biggest items on the tech menu this year. And if you subscribe, you’ll get the scoop on this industry, its best opportunities, and exactly how it can make you a fortune.
If you’re interested, just click here to check out more details.
That’s all for now, but I’ll be back soon with another update.
Until next time,