This Day On The Street
Continue to site right-arrow
This account is pending registration confirmation. Please click on the link within the confirmation email previously sent you to complete registration.
Need a new registration confirmation email? Click here
TheStreet Open House

Tech Banquet Gone Before Investors Get a Bite

Stocks in this article: PCLN AMZN AAPL GOOG FB YHOO

NEW YORK (TheStreet) -- Technology is always eating its young. This week's leaked information on an Apple (AAPL)-Beats Electronics deal points to what would be only the latest in a string of exciting new companies gobbled up before then went public.  

Small investors don't get a taste of many such deals, either on the front end or the back end. They won't learn about it until the bubble pops and supposedly safe investments crash.

Systems like Crowdfunder, which offer small investors the chance to get in on the ground floor of start-ups, claim they can plug the gap. But Stanford research indicates nearly 90% of venture capital investments fail. 

Want to fight those odds? If you don't, you may not get a sniff of today's hot deals.

Back in the 1990s, venture capitalists quickly took investments public in order to cash in on their successes and recycle the money. But that carried significant downside. After the dot-com bubble popped, small investors had to eat some failures, like, Webvan, and CMGI. Some, like Priceline (PCLN - Get Report) and Amazon  (AMZN - Get Report), returned to glory, but that came years later, and these were the exceptions rather than the rule.

I personally remember getting stuck with one such "investment," when a site I was writing for, which had been acquired by Andover.Net, was in turn acquired by a company called VA Linux in early 2000. I was offered stock options, which I should have flipped, but instead I held the shares and rode them to disaster.

Lesson learned. But will I ever get a chance to apply it?

These days venture capital has merged into private equity, which does its own forms of financial engineering. Private equity companies don't need to recycle their cash like VCs do. They are large enough to take over, not just large private companies, but public ones as well.

As a result many start-ups now routinely get multiple rounds of capital, each at a higher valuation. As these companies mature, private equity will take a bigger position, so the VCs can recycle their cash, but the company may still not come public.

Whether or not it they become profitable, today's tech start-ups can also be recycled into larger tech companies as never before.

During 2013, for instance, Apple made 13 acquisitions, including four in the mapping area, two in semiconductors, and a company called WiFiSlam involved in something called "indoor location." 

1 of 2

Check Out Our Best Services for Investors

Action Alerts PLUS

Jim Cramer and Stephanie Link reveal their investment tactics while giving advanced notice before every trade.

Product Features:
  • $2.5+ million portfolio
  • Large-cap and dividend focus
  • Intraday trade alerts from Cramer
Quant Ratings

Access the tool that DOMINATES the Russell 2000 and the S&P 500.

Product Features:
  • Buy, hold, or sell recommendations for over 4,300 stocks
  • Unlimited research reports on your favorite stocks
  • A custom stock screener
Stocks Under $10

Jim Cramer's protégé, David Peltier, uncovers low dollar stocks with extraordinary upside potential that are flying under Wall Street's radar.

Product Features:
  • Model portfolio
  • Stocks trading below $10
  • Intraday trade alerts
Try it NOW
Try it NOW
Try it NOW

Check Out Our Best Services for Investors

Dividend Stock Advisor

Jim Cramer's protégé, David Peltier, identifies the best of breed dividend stocks that will pay a reliable AND significant income stream.

Product Features:
  • Diversified model portfolio of dividend stocks
  • Updates with exact steps to take - BUY, HOLD, SELL
Trifecta Stocks

Every recommendation goes through 3 layers of intense scrutiny—quantitative, fundamental and technical analysis—to maximize profit potential and minimize risk.

Product Features:
  • Model Portfolio
  • Intra Day Trade alerts
  • Access to Quant Ratings
Options Profits

Our options trading pros provide over 100 monthly option trading ideas and strategies to help you become a well-seasoned trader.

Product Features:
  • Actionable options commentary and news
  • Real-time trading community
Try it NOW
Try it NOW
Try it NOW
To begin commenting right away, you can log in below using your Disqus, Facebook, Twitter, OpenID or Yahoo login credentials. Alternatively, you can post a comment as a "guest" just by entering an email address. Your use of the commenting tool is subject to multiple terms of service/use and privacy policies - see here for more details.
Submit an article to us!


DOW 17,164.95 -251.90 -1.45%
S&P 500 1,994.99 -26.26 -1.30%
NASDAQ 4,635.24 -48.1670 -1.03%

Partners Compare Online Brokers

Free Reports

Free Newsletters from TheStreet

My Subscriptions:

After the Bell

Before the Bell

Booyah! Newsletter

Midday Bell

TheStreet Top 10 Stories

Winners & Losers

Register for Newsletters
Top Rated Stocks Top Rated Funds Top Rated ETFs