One hundred dollars ($100) invested into Uber’s October 2010 private placement was valued at $1,050,000 by the end of 2015. The only problem is that it was not possible to invest an amount as small as $100 into Uber in 2010 due to a ban that the SEC had implemented in 1933. I highly recommend the video at the very bottom of this article. It provides details on how Uber became successful and how to find the next Uber.
With the SEC’s lifting of the crowdfunding ban today (May 16, 2016) every US citizen will be able to invest $100 or less into new companies for the first time since 1933. I highly recommend the video at the very bottom of this article. It provides details on how Uber became success and how to find the next Uber.
Prior to 1850 there was no such thing as an investor in the United States of America. Investing began because of the invention of the steam engine and the subsequent advent of railroads. Before the beginning of private investing, individuals merely deposited their money in banks. When banks refused to provide expansion capital to railroads, it became a motivating factor for pioneer merchants and residents to withdraw their money from the banks and become first-time investors in railroad stocks and bonds to encourage prosperity for their communities. The 6 minute 43 second video below covers how crowdfunding evolved in the 1840s, why the SEC banned it in 1933, and the future of crowdfunding because of the SEC’s lifting of the second and final ban on May 16, 2016.
There was no such thing as an investment bank or stock broker in the U.S. at the time individual investing began. Those whom the public trusted to make their first-ever investments and to ensure that their monies were being utilized to build the railroad were the community’s merchants and businessmen. One such merchant was Henry Lehman. He immigrated to Montgomery, Alabama in 1844 and set up a cotton exchange. The outcome of the success that Lehman and his brothers had in getting railroads financed was their founding of the Lehman Brothers investment bank in 1850, six years after Henry Lehman had immigrated to America. Goldman Sachs and the other investment banks, which were founded in the last half of the 1800s, all had deeply imbedded railroad roots. These new investment banks and their pioneer investors who financed the railroads went on to finance the companies that emerged to transform the economy from agricultural to industrial from the 1880s to the 1920s.
Major Inventions & Industrial CompaniesGenerating Dynasty Wealth Founded 1885-1919
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Invention/Company
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Co. and Year Founded
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Market Cap 11/20/15
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Telephone
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AT&T (T), 1885
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$207B
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Electricity
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General Electric (GE), 1889
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$310B
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Automobile
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Ford Motor (F), 1903
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$58B
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Computer
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IBM (IBM), 1911
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$134B
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Airplane
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Boeing (BA), 1916
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$100B
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Radio
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RCA, 1919
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N/A acquired by GE
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For a community, having railroad service was crucial to its very survival. Likewise, the laying of vast networks of railroad tracks from 1860 to 1890 is analogous to the advent of the Internet, which resulted in the majority of the world’s population gaining access to the World Wide Web and e-mail service in the late 1990s.
The railroad transformed the U.S. economy from being agrarian-based to having an industrial base. The railroads and then the Internet, which began the transformation of the U.S. economy from industrial to digital, are definitely the two greatest economic developments that have occurred within the U.S. during each of the last two centuries.
The birth of investing culminated with securities fraud becoming rampant in the 1920s, a period that became infamous as the “roaring twenties”. Growing fraud and corruption culminated both in the Stock Market Crash of 1929 and the ensuing nationwide Great Depression.
Four years after the Great Depression began, the United States Securities & Exchange Commission (SEC) was established. The SEC immediately implemented two laws prohibiting businesses (i) from advertising to raise capital, and (ii) from raising capital from individuals who were not accredited investors (possessing a minimum net worth of $1 million). The SEC also implemented rules and regulations requiring a business to utilize a licensed broker-dealer.
The complex network, or ecosystem, established by the SEC in 1933 and 1934, for the purpose of motivating investors to trust the securities markets, provided the capital for new inventions and businesses until 2010, when the Dodd Frank Act was passed and became law. Dodd Frank was a response to the crash of 2008, and it significantly increased the liability for the broker-dealers that financed new inventions and emerging companies. The Act also increased the SEC’s enforcement powers and increased its ability to prosecute broker-dealers. This resulted in many broker-dealers ceasing to finance new inventions and companies. The ecosystem that had been in place since 1933 was broken.
In 2012, the JOBS Act was passed. Under its provisions the SEC was mandated by the U.S. Congress to lift both of the bans that the SEC had put into place in 1933. In September of 2013, the SEC lifted the advertising ban. On May 16, 2016, the SEC lifted the ban prohibiting non-accredited individuals from investing in early-stage and start-up companies.
There were two caveats for the SEC’s lifting the ban. The first was that all entities wishing to raise capital from a crowd of non-accredited investors utilize a SEC approved funding platform. The second caveat was that a funding platform not promote or recommend any entity seeking funds over any other entity seeking funds. The limiting of a funding platform’s ability to promote or recommend a business needing funding created the need for Social Investing communities.
My October 20, 2014 “Crowdfunding Must Get Back to Its Roots” article explains why social investing communities would have to emerge for crowdfunding to be successful. Researching the history of investing and the ensuing in-depth studies of crowdfunding led to the founding of the Dynasty Wealth Investing Community in April of 2014. It also led to my conceiving of the Trophy Investing community.
Since Trophy will specialize in educating the crowd and will cull from all of the crowdfunding opportunities to recommend only the very best ones to community members I predict that it will become the Facebook of social or community investing. To become a member of the Trophy Investing community go to www.michaelmarkowsk.net and sign up for a FREE 30 day trial subscription to the Trophy Investing letter. The letter recommends the shares of micro-cap companies that have the potential to multiply in price within 5 years and the plan is to also recommend crowdfunding opportunities.
With the SEC’s lifting of its crowdfunding bans that had been in place since 1933 and the founding of Dynasty Wealth and the three other social investing communities mentioned in my October 2014 article, social or community investing is now back to its 1850 roots. The social investing communities will once again rise to be the primary financier of the companies that will drive the growth of the world economy.
Dynasty Wealth LLC, the “boutique” research firm that I founded evolved from research that I had conducted on the ongoing transformation from the industrial economy to the digital economy. My findings enabled me to conclude that the period from 2015 through 2020 would be the best ever for investors to generate dynasty wealth returns of 10- to 100-times from utilizing a truly diversified portfolio. The video entitled, “Digital disruptor companies have the potential to get $10 billion valuations quickly,” below provides details about how investing into a portfolio of digital disruptors enable investors to create dynasty wealth. It discusses digital disruptor UBER. A $10,000 investment into UBER in 2010 was valued for $105 million in 2015. I recently discovered a digital disruptor in the $593 billion U.S. grocery industry and my research recommendation covering it is available at www.michaelmarkowski.net.
