The early money & the long money
When we hear about startups that have gone on to be huge successes the mind often gravitates to all those early investors. Those who had a seat at the table in the angel rounds, those who knew the founders and got in early enough to make some serious money. It’s a natural reaction when companies go on to reach the unicorn level. It is true that people who get in early always make more money. Late money often pays a premium as future expectations (when positive) are priced into the investment.
But there is actually a way to become an early investor even when you are late to the party. The way to do it, is to be a long investor.
If we invest long, then by default we arrive early.
When we invest in something for the long haul, we eventually become an early investor. Even if the investment vehicle was well established when we arrived and got involved. If we stay long enough the price becomes cheap through the dual benefits of inflation & compounding. Just ask your parents what price they bought their first house for and you’ll see the relationship between long and early investing. It also works for quality stocks too. While very few people indeed got to invest in Google before their IPO, those who bought the stock on the open market once the stock was publicly traded would have made more than 6 times their original investment in 10 years.
When we start to invest in 10 year plus timelines all manner of investments from property to index funds provide outsized returns. And while we may not be clever enough to invest in something that grows quickly, we can be smart enough to invest in something long enough for it to become early.