Dear Startup Investor,
Neil here. I hate secrets – especially secrets designed to build walls between everyday folks and the people at the top.
In the startup world, that secret used to be deal flow. You had to know the right people personally to get in on the best deals. And often, those “best deals” were reserved for venture capitalists and institutional angel investors who could write $50,000 checks in their sleep.
Luckily, the tides have changed dramatically for angel investors.
Today, I counted over 840 startup companies raising money across Republic, StartEngine, and WeFunder alone – just three of the crowdfunding portals currently available to everyday investors. On Republic alone, 284 of those opportunities have a minimum investment of $100 or less.
Now of course, not all of those opportunities are worth their salt. But the sheer number of startups raising – combined with communities like ours to help you separate out the best opportunities – is what keeps me confident about the future of private investing for all people.
But in the public world, it’s not always like that. In fact, there are several systems set up that still damage retail investors and benefit the institutions at the top. Today, let’s talk about one of them.
In July, Robinhood went public in what was one of the most anticipated IPOs of the year. Robinhood offers commission-free trading, and instead relies on other methods to make its money. One of those methods is “payment for order flow,” a system where Robinhood sells its customers’ trades to giant market makers like Citadel or Virtu.
These market makers then execute the trades and make a share of the profits (Robinhood also earns a portion). At times, it can be an all-out order flow bidding war to see who can charge the lowest prices and secure the best order flow. And it’s all behind the scenes, where retail investors can’t see it happening.
Now, experts have gone back and forth for years on whether or not payment for order flow benefits or harms the market – and more specifically, retail investors. But here’s what I think.
Payment for order flow turns Robinhood users from customers into a product. Through this method, Robinhood’s customers have become a vessel for how the company earns its revenue. In just the first quarter of 2021, for example, 81% of Robinhood’s revenue came from payment for order flow. In 2020, 75% of its revenue came from the practice.
The practice is even illegal in the United Kingdom. At the end of August, SEC Chairman Gary Gensler even hinted at banning the practice in the United States, too. That ongoing scrutiny has taken a toll on Robinhood’s stock, which has dipped by around 41% since August 4.
Now, I don’t like practices that take power out of customers’ hands. That’s exactly why I have always turned to startup investing as my preferred way to make money – because startup investors aren’t even customers… they’re even more powerful.
When you invest in a startup, you’re a real part of that company’s growth. You’re on the cap table right from the beginning, years before that company ever goes public. And because of that, you’re offering that company way more value than just your money.
You have skills and expertise that could be useful to a startup founder, and they might even turn to you for advice once in a while as their company grows. And at the end of the day, if all goes well, your original investment could absolutely explode in value – and you could come out on the other side with a fortune.
You see, I’m not the only person who thinks systems like payment for order flow are sketchy practices. There are folks who have literally left Wall Street because they were so fed up with how it was keeping wealth away from their clients and Main Street traders.
It may come as no surprise that Wall Street does not like these people. One of them even got blacklisted for trying to share his number-one trading strategy… one that uncovers one of Wall Street’s biggest flaws and exploits it for massive returns.
He and his fellow pro traders scored up to 1,000% in 30 days or less using this method – and now, he’s put a new twist on it to let anyone play it, for $100 per trade, max. Today, he wants to show you exactly how to put it to use.
See it for yourself over here, and I’ll be back soon with another update.
Until next time,