The Sharing Economy

By Matt Milner Jan 20, 2014, 5:06 PM 

Today, once again, we’re breaking out our 2014 “crystal ball”!

We’re offering up a prediction about a major business trend and dishing out advice about how to make money from it through equity crowdfunding.

Let’s start with a quote:

“Take teenagers 20 years ago and ask them would they rather have a car or a computer? And the answer would have been 100% of the time they’d rather have a car, because a car represents freedom, right?…

“But there is a new generation coming where freedom is defined by ‘I can do anything I want, whenever I want. If I want a ride, I get a ride, but I don’t have to worry. I don’t have to make car payments. I don’t have to worry about insurance. I have complete flexibility.’ That is freedom too.”

What’s Airbnb? Simply put, it’s a fast-growing hospitality service. The “bnb” stands for bed and breakfast.

This quote, from November 2013, comes from Marc Andreessen, one of the planet’s most farsighted and successful entrepreneurs and investors…

Marc made a king’s ransom investing early in home runs like Facebook and Twitter. So when he makes statements about the future, we put down the remote and perk up our ears.

In this case, he’s pointing to a new trend that enables “freedom.” This trend has such massive implications that the term mega-trend is more appropriate.

The mega-trend I’m talking about is known as “the sharing economy.”

The sharing economy allows us to use the Internet to rent anything we need from other people just like us. Cars, bikes, boats… even parking spots and power drills. Instead of buying them, now we can “rent” them from our neighbors.

Sharing is turning into a big business, and we believe it’s going to get bigger fast. We’re not alone: Forbes estimates that sharing put $3.5 billion into citizens’ wallets this year and is growing by 25% per year.

Let’s look at an example…

At a holiday party in NYC last month, I was talking to a fancy friend — a 37-year-old investment banker — about her upcoming vacation to Paris. I asked her where she was planning to stay, expecting her to mention some swanky hotel.

Instead, she said this: “An awesome apartment overlooking the Seine! I’m using Airbnb.”

What’s Airbnb? Simply put, it’s a fast-growing hospitality service. The “bnb” stands for bed and breakfast.

For those willing to “share” their home in exchange for some income, Airbnb allows you to rent out your spare bedroom (or your whole place, without you in it) by the day, week or month.

And for travelers, it makes for a more affordable and interesting stay.

Airbnb has 300,000 listings in 192 countries. In 2012, acting as a matchmaker and administrator, they helped 2.5 million people find a place to stay. In exchange for handling the reservation, collecting the money and providing insurance, they take a cut of the transaction — about 10%.

Now let’s look at another example of the sharing economy…

Lyft is a service that allows people with spare time and a car to run a taxi company.

Need a ride somewhere? Fire up the Lyft app on your phone and electronically “hail” a cab, and a regular citizen with a regular car will soon be chauffeuring you to your destination. All fees are pre-negotiated.

It certainly seems that there’s gold in these sharing hills. But here’s the important thing about investing in — and profiting from — mega-trends:

Young companies like Lyft and Airbnb are privately held. You can’t buy their shares on the stock market. And if they do go public in the future, by that time, the big profits will already have been made.

You need to invest while they’re still small. You need to get in early.

Lyft, for example, raised its first round of $300,000 in 2009. Its valuation (the private company equivalent of a “market cap”) was likely in the $3 million range.

Lyft went on to raise $60 million in May 2013 — at a $275 million valuation. That’s the equivalent of a 9,100% gain in four years!

Airbnb has done even better. Its valuation in 2008 was about $1 million. This year, it was valued at $2.5 billion. That’s a 250,000% return.

Airbnb shows you what can happen when you identify a mega-trend and invest early.

That’s why we’re so excited about equity crowdfunding: Now regular investors can put money into high-growth companies at their earliest stages.

As believers in the investment potential of the sharing economy, we’ll pass along any relevant companies for your review in our weekly deal roundups.

One company in fact is called Geekatoo. Despite the silly name, this “sharing” company is attacking a big, serious market.

Geekatoo allows independent IT technicians (i.e., anyone with specific IT skills and free time) to “share” their technical services with those who need help. Their main competitor, Geek Squad, does $2 billion in annual sales. Geekatoo is creating a less expensive, “shared economy” version.

It certainly appears that Geekatoo is focusing on an attractive opportunity. Here’s to a happy, healthy, profitable 2014!

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