How to Invest in the Next Apple

People who invested early in the world's biggest companies explain how all of us can become billionaires.

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29 November 2018, 12:41am

Illustration by Christine Obst

This year we held Australia’s biggest millennial money survey. We’re spending the next few months trying to unravel the parts of our economic lives that cause us so much anxiety. Stick with us, we’re all in this together.

Most stories you hear about investing are either something amazingly positive or utterly horrifying. But the success stories always make it seem so easy. Some lucky idiot has a good feeling about a company that ends up making a zillion dollars. Boom, pull up the jet.

Realistically though, there must be some technique in spotting these pre-boom startups, right? So we asked people who’ve made a lot of money from good, but not super obvious, investments how we normal idiots can also be so lucky.

KNOW THE ROOTS

Bruce Pfeffer is bashful when he describes his investment success, stressing repeatedly that he’s no expert, just a guy who teaches circus arts to kids for a living. But while he may see himself as a normal person, he’s done some extraordinary things—investing in both Apple and Facebook before they boomed.

Originally, Bruce was just a loyal customer. He’d been using Apple computers exclusively at his business since 1984. “I liked Apple, and I knew enough that Steve Jobs and Steve Wozniak—they were a couple of wise guys,” he remembers. “I always ran with Apple. It worked for me.”

But it was in 1998, when Steve Jobs came back to Apple, that Bruce decided to purchase 100 shares worth 40c apiece (at the time of writing, they were worth roughly $200). When he made the move, Apple were actually months away from bankruptcy. But Bruce admits he didn’t know anything about the company’s trouble. Rather, he just figured that Steve’s return would allow Apple to find its way again and grow. “When Steve came back to the company, he got [Apple’s] roots back together.”

He was right of course. A little over a decade later, he managed to repeat his feat when he invested in Facebook. Looking back, like Apple, Bruce explains he was impressed by the concept of Facebook alongside its capabilities and potential. “[I saw] how it was an easy means to communicate with the kids, and I saw a lot of people getting involved with it, so I thought, This is probably going to be alright.”

Once again, swayed by a product he could see himself using, Bruce purchased 100 shares for $38 apiece in 2012 when Facebook went public. Six years later, those shares have increased by more than $100.

After two big wins, Bruce’s advice is to diversify your portfolio, be prepared to stomach the gamble, and stay for the long haul. Beyond that, he follows a simple mentality—“I go with companies that I like.”

FOLLOW THE LEADER

For Airtasker chairman and early investor James Spenceley, the way to spot an investment opportunity is to keep an eye on the person running the company. “I’ve seen great ideas and huge opportunities squandered because the CEO or the founder was too greedy [or was] fighting with shareholders,” he tells VICE, adding. “Nothing destroys value more than people problems.”

James, who for the record is estimated to be worth a chill $45 million, is the founder of the multi-billion dollar Vocus Group and has a history of successful ventures. But his first experience with the outsourcing startup Airtasker wasn’t as an investor, but rather a user back in 2014. The day before Christmas, James bought a tool bench which didn’t fit in his car. Considering the time of year, he knew that hiring a ute would be difficult and expensive. He opted to try Airtasker: “I just thought this is crazy. This actually solves a problem I’ve had 10 times in my life for one specific thing. What else can it do?

Noting the company’s global potential, James organised a meeting with CEO Tim Fung a week later. While he was already on board with the idea, it was Tim’s charisma that convinced him to invest $650,000, and come on board as a mentor. “Tim actually made me feel inadequate as a CEO. And that’s when I knew this business had all the pieces,” James explains. “That’s the key. Do you have faith that [the CEO is] going to make the right decision in all of those right situations.”

THE LONG HAUL

In 1995, venture capitalist Tom Alberg was also moved by the vision of a CEO when he met and invested in Jeff Bezos’ online bookstore Amazon. At the time Bezo had only been in business for a year. Today Amazon is the second company in the world to be worth over a trillion dollars, and Tom is the director. He doesn’t pretend to have foreseen the company’s success in the mid 90s, and notes that many were incredulous in the beginning. But he was impressed enough by the CEO to back him against the Barnes and Noble ruled US book market. His advice: never dismiss the underdog. “The history of startups is that they can challenge the established company. Whether it’s an internet company or an ice cream company,” he reflected.

But while Tom does believe there are certain signs to look for, he stresses that they’re irrelevant if you can’t handle the pressure: “If you have a very low tolerance for risk or losing some money, you probably shouldn’t be investing. You need to expect that all your investments could lose.”

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