[Part 2] Stocks going down — profits going up!?



Two weeks ago, I told you about a strange phenomenon taking place in the markets right now.

It doesn’t happen often. But when it does happen, it could mean big profits for your startup investments.

Today, I want to tell you more about this situation…

And explain why things may be playing out even faster than I’d expected.

Prices Down, Profits Up!

As I explained here, when we go through big stock market corrections, not only do we see a drop in stock prices…

But we also see a drop in startup valuations.

For investors like you, this can be good news. After all, when startup valuations go down, you can secure your stakes in these companies at lower prices. And that means it’s easier to earn big gains when they get acquired or go IPO.

As I also explained, historically, when we see a big drop in stock prices, it takes about a year or two to see startup valuations drop.

For example, after the dot-com crash in 2000, the average startup valuation dropped from $12 million to $5 million (a decrease of more than 50%) within a couple of years.

However, that’s NOT what we’re seeing this time around. Let me explain…

Everything’s Going on Sale!

Year-to-date, the Nasdaq is down roughly 15%.

But given what’s happening in the world today (Ukraine, continued supply-chain issues, inflation, etc.), we expect things to get a lot worse before they get better.

As I explained a minute ago, normally we’d expect it to take time for startup valuations to catch up with the market. But this time around, that’s not what’s happening…

Instead, startup valuations are already following the market straight down.

In fact, according to Carta, a company that provides services to private startups, valuations in the first quarter of 2022 are already down ~30%. They’ve dropped from an average valuation of $17.7 million a year ago, to just $12.6 million today.

That might be bad news for entrepreneurs…

But it’s great news for investors like you and me.

More Chances to Profit

If the market continues its downward trend…

And startup valuations follow right along with it…

We could add a number of high-quality companies to our portfolio this year at bargain prices!

If you’d like to learn more basic lessons like this about startup investing, check out the free collection of Resources we created for all our readers »

Happy investing!

Best Regards,
Wayne Mulligan
Wayne Mulligan