Investor Chris Sacca highlights the key risks of betting on startups – and offers 3 tips for amateurs

chris sacca
Chris Sacca.

  • Chris Sacca highlighted the risks to amateur investors of backing startups.
  • The billionaire venture capitalist pointed out that professionals often lose money.
  • Sacca advised casual investors to spread their bets, avoid debt, and expect to fail.
  • See more stories on Insider’s business page.

Investor Chris Sacca praised new rules allowing more people to bet on startups in a Twitter thread this week. However, he told amateur investors to exercise caution given the significant risks.

“Mom & Pop shouldn’t be shut out anymore,” Sacca said, after regulators expanded the definition of “accredited investor” and loosened restrictions on how much people can invest in crowdfunding rounds.

Yet early-stage companies rarely succeed, the Lowercase Capital founder and former “Shark Tank” star warned.

“Most startups shit the bed,” he said. “Don’t invest money that you can’t afford to lose.”

Sacca – an early investor in Uber, Twitter, and Instagram – pointed out professional investors back dozens of businesses to boost their chances of finding a winner.

“The real danger is when everyday folks put money into one of these companies, but can’t afford to place multiple bets,” he said. “Letting it all ride on one venture stacks the odds against you.”

Amateurs shouldn’t get cocky and expect to outsmart the pros either, Sacca cautioned.

“I’ve shattered the market, put up silly numbers, and have an insanely high hit-rate,” he said. “Yet I’m here to tell you that we still have companies go to zero.”

Angel investors and venture capitalists stomach losses even though they can help their portfolio companies find a buyer, execute a turnaround, or raise more money, Sacca continued.

“We have the paddles and can yell ‘Clear!” he said. “And yet, we still have patients flatline on the table.”

Sacca dismissed the idea that betting on startups should be “reserved for the rich.” Yet he felt compelled to offer some tips to help casual investors avoid being the “inevitable horror story.”

“Only invest what you can lose. Don’t borrow,” he said. “Spread it around multiple investments. And, overall, assume you are going to lose your money and be pleasantly surprised if you get back more than you put in. Good luck.”

Sacca offered similar advice to day traders earlier this year. He warned them not to borrow money to make trades, highlighting his experience of turning his student loans into $12 million, only to wake up $4 million in debt after his debts soured.

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Billionaire investor Chris Sacca told people not to ignore the $69 million NFT sale this week

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Chris Sacca.

  • Chris Sacca sees the $69 million NFT sale this week as significant.
  • The venture capitalist said people shouldn’t ignore non-fungible tokens.
  • Sacca highlighted the appeal of collectibles and the value of creators getting paid.
  • See more stories on Insider’s business page.

Some people will have rolled their eyes at the record-breaking $69 million sale of a digital artwork at a Christie’s auction this week. They should pay attention to what the transaction signifies, billionaire investor Chris Sacca tweeted after the news broke.

“No matter how you feel about NFTs, don’t look away from this,” he said. He was referring to non-fungible tokens that serve as virtual certificates of ownership and authenticity for digital items, and are stored securely on a blockchain.

“It’s okay to not get why someone would pay that, and it’s okay to be bummed about the climate impact,” Sacca continued. “But don’t be willfully ignorant about what’s happening.”

Metakovan, the pseudonymous buyer of “Everydays: The First 5000 Days” by artist Beeple, will receive a NFT confirming they’re the new owner of the piece. However, there’s nothing to stop other people downloading and sharing copies of the artwork.

Sacca – an early investor in Uber, Twitter, and Instagram – has praised NFTs and downplayed concerns they’ll be a short-lived fad.

“Very cool and I am a collector at heart,” he said in a Twitter thread last month. “I don’t think it’s a bubble, and I do think it will work.”

However, the Lowercase Capital founder and former “Shark Tank” star said he wouldn’t be abandoning physical memorabilia anytime soon. “I have a feeling this is going to be the tech that finally turns me into the ‘Yeah, but I only listen on vinyl’ guy,” he joked in the thread.

Sacca lauded NFTs as the next frontier for collectibles, and praised them for allowing creators to collect royalties on future resales of their work, in a Forbes interview published this week.

“Collections as a reflection of your identity are powerful,” he said. “And I will never underestimate the beauty of tools that empower creatives to do and get paid for their best shit.”

Billionaire investor and fellow “Shark Tank” star Mark Cuban also touted NFTs in an interview this week, labeling the ability to receive royalties a “game-changer” for digital commerce.

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Billionaire investor Chris Sacca says he’s been invited to sit on SPAC boards and do nothing

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Chris Sacca.

  • Chris Sacca has been invited to sit on SPAC boards and do nothing.
  • The venture capitalist tweeted that many SPAC directors are “window dressing.”
  • Charlie Munger, Jeremy Grantham, and other top investors have criticized SPACs.
  • Visit the Business section of Insider for more stories.

Billionaire investor Chris Sacca tweeted on Tuesday that he’s been invited to sit on the boards of several special-purpose acquisition companies (SPACs) – with no expectation that he does any work.

“I’ve been offered a bunch of SPAC board seats,” the former “Shark Tank” star and Lowercase Capital founder said. “The pitch usually goes something like, ‘You’ll get [lots of shares] for just putting your name on it and doing nothing.'”

“While there are some board members actively helping, too many are just window dressing,” Sacca added. “Don’t get distracted.”

SPACs typically aim to secure a stock-market listing then acquire a private company, offering businesses an alternative way to go public than an initial public offering (IPO).

The number of SPACs has exploded in recent months as investors such as Bill Ackman and Chamath Palihapitiya, celebrities including Alex Rodriguez and Colin Kaepernick, and ex-politicians such as Paul Ryan and Gary Cohn have jumped on the trend.

Sacca – an early investor in Uber, Twitter, and Instagram – has shifted his focus towards tackling issues such as climate change and voter suppression in recent years. He isn’t the only high-profile investor to voice concerns about SPACs recently.

Warren Buffett’s business partner, Charlie Munger, dismissed them as “crazy speculation” and evidence of an “irritating bubble” in February.

Similarly, GMO cofounder Jeremy Grantham – who unintentionally made a fortune when one of his investments was acquired by a SPAC last year – slammed them as “a license to rip investors off” and suggested they should be banned.

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Billionaire investor Chris Sacca mocks ‘Robinhood bros’ for being reckless: ‘Stonks never go down!’

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  • Venture capitalist Chris Sacca dismissed amateur traders’ huge gains in 2020 as the product of lucky timing in a recent tweet.
  • “To everyone who got into trading stocks this year, I have a little hard truth for you: You’re not actually that good at it,” the billionaire founder of Lowercase Capital and former “Shark Tank” star said.
  • Sacca mockingly praised day traders in a follow-up tweet after weathering backlash for his comments.
  • “To the angry Robinhood bros who got into trading stocks this year: I was wrong. You’re amazing,” he said. “Stonks never go down!”
  • Sacca has repeatedly underscored the risks of trading stocks and other assets such as Bitcoin, especially with borrowed money.
  • Visit Business Insider’s homepage for more stories.

Newbie traders who scored massive windfalls in 2020 simply got lucky, billionaire investor Chris Sacca said in a recent tweet.

“To everyone who got into trading stocks this year, I have a little hard truth for you: You’re not actually that good at it,” the former “Shark Tank” star and founder of venture-capital firm Lowercase Capital said. “You just caught a wild bull market. Take some money off the table.”

Read more: Wall Street’s biggest firms are warning that these 7 things could crash the stock market’s party in 2021

Sacca’s comments were met with swift backlash. Dave Portnoy, the Barstool Sports founder who became the face of a new generation of day traders earlier this year, told Fox Business that he doesn’t know who Sacca is, but the investor “sounds like a sore loser and an idiot.”

The Lowercase chief – an early investor in Twitter, Uber, and Instagram – responded to the criticism with a sarcastic tweet ridiculing Robinhood users, one of the most popular trading apps.

“To the angry Robinhood bros who got into trading stocks this year: I was wrong. You’re amazing. This has nothing to do with the market. It’s all you and your mad skillz. Don’t take profits off the table. Double down, on margin. Borrow everything you can. Stonks never go down!”

In internet slang, stonks is a deliberate misspelling of stocks.

Read more: BANK OF AMERICA: Buy these 16 medtech stocks with strong fundamentals that are set to soar post-pandemic

Sacca – who made his fortune in the early 2000s then lost a huge chunk of it when the dot-com bubble burst – has repeatedly cautioned amateurs about trading risks, particularly with borrowed money.

“What percent of retail ownership of crypto is supported by leverage? What about stocks? I am beyond worried about the debt lessons that a generation of app traders weren’t around to learn a cycle ago,” Sacca replied to a December 26 tweet by Bitcoin bull Mike Novogratz underscoring the risks of excessive leverage.

“Don’t borrow to trade stocks/BTC,” Sacca tweeted a few hours later.

Read more: The founder of the world’s first vegan ETF explains how her market-beating fund is naturally built to include the pandemic’s biggest winners – and why industry titans like Facebook and Uber fit the bill

Sacca has issued similar warnings in the past.

“I’m here to tell you that trading millions of dollars you don’t have is a thrilling way to ruin your health and financial future. Fun!” he tweeted in November 2019.

“Investing is a great way to make money. Trading is a great way to lose it. Do yourself a favor and hide your “Stocks” app forever,” Sacca tweeted in 2013.

Sacca and his wife and business partner, Crystal, shifted their focus from day-to-day investing to tackling issues such as climate change, voter suppression, and criminal justice reform in early 2017.

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