Making Real Money
“Making Real Money – How to do it” will show you where the real money is made. It is made before freelancers even get a chance to invest. So, how does one join this magic circle? Read on.
Many IT workers like to invest in shares, especially contractors. They either buy the shares on the Stock Market, or they buy the shares at issue at Initial Public Offering (IPO) time.
However, what most people don’t know is that most of the money is made before then. People who have good ideas and people with money normally do not know each other.
There is a whole breed of people making real money by putting these two sets of people in touch.
Making Money via Deal Brokers
So how does one go about making some real money?
The way that it works is that these guys, the Deal Brokers let us call them, find young companies with good ideas that they think will fly and could obtain a market quote.
They then put some initial investment into these companies, with the promise of seeking pre-float investment and then getting a market float.
Making Real Money – One Example
I know of one guy who invested £70,000 in a small company with a very good idea. For this he got 20% of the company.
He then raised £500,000 pre-float funds for the company, obviously for a much higher share price than he paid.
He got a further part of the company for raising those funds, which meant he now had 30% of the company.
Then he arranged a stock market float, raising £1.25 million, at a higher share price still.
As they issued only 10% of the shares at the float, this valued the company at £12.5 million. This diluted his stake slightly to 27% of the company, making his stake worth £3,375,000. This is called making real money.
Pretty Pleased
This means that he made almost 50 times his original stake in a period of somewhere between 6-9 months. He was pretty pleased with this deal as he said that he normally looks to make 10 times his original stake. Making real money is not so difficult if you know.
Of course there are some deals that fall down and don’t make it to market, and have to be remaindered. He says that about one-in-five deals fail.
It’s not bad is it, when four out of five deals succeed, making you 10 times your money in 6-9 months each time. That’smaking real money.
Looking After ‘His Guys’
His primary aim, of course, is to make himself money.
However a very important secondary objective is to make his investors money. I’m talking about those who buy at the pre-float investment stage,. That is those who bought when the £500,000 was raised.
These guys are buying at a heavy discount to the coming IPO float price. They may be buying at a half to a third of the float price.
Although they don’t make the bulk of the money, it’s still pretty nice. That’s especially if you know a few of these guys who do the deals, and you can do it fairly regularly.
Waiting Period
There’s normally a 3-6 month waiting period for these guys to realise their gains.
What also happens, is that many of these guys are Deal Brokers themselves. They let each other in on each others deals.
It’s very important to the Deal Broker that his clients make money from the deal. If they do, then they are likely to invest in his next deal, and perhaps with more money.
Incestuous Relationship
Many of these guys know each other. Many of them started out working for City investment funds. It is a bit of an incestuous circle of mutual gain.
Contractors and IT workers are not normally inside this circle. I managed to get into the outer circle of this through someone that I know. I have managed to get into the pre-float stage of a couple of deals. One was successful. The other one is still pending.
I’ll probably go for some more. You really want the market to be in a healthy state so that the price rises after the IPO.
The normal deal at pre-IPO stage is that you would get the shares at maybe 10p (or less). The shares would float at 20p (or more) within six months.
If it floats during good market conditions then you could expect the price to easily rise to 30p very soon after the float, making you treble your money.
You’re not the one who makes the major money from the deal – the Deal Broker is.
You don’t care though as long as you make a good profit.
Initial Stage
I know some of the people involved. The time to be getting in at the initial stage.
If anyone is interested in making real money, and wants to break into the magic circle, just contact me at the website email address or [email protected]
You can also join our Contractor Dragons Investment Club on LinkedIn to get information about potential early stage investments.
If you want to join our Contractor Crowdfunding Club to hear early of opportunities to invest in startup companies or early companies before they come to market, fill in the form below.
