An ideal portfolio contains a nice blend of mature, established companies and younger, fast-growing businesses. To round out your exposure, why not also load up on young upstart companies that are still not ready to go public? When they do, the
initial public offering (IPO) can often deliver an embarrassment of riches to investors.
But how can individual investors own shares of companies that aren't yet publicly traded? Well, quite easily -- simply by owning shares of publicly-traded firms that act as Venture Capitalists (VCs). A pair of VC-like firms has established impressive track records, and their current roster of private investments could possess major upside when the economy turns up and the IPO market is flourishing.
A focus on tiny technology is why New York-based Harris & Harris (Nasdaq: TINY) chose its ticker symbol: it focuses investments on companies working with advanced miniaturization technologies, such as nanotechnology. The premise behind nanotech was simple. Scientists had found ways to develop ultra-tiny particles that could be used in a range of biotech, industrial and cosmetic applications. We're talking smaller than "micro." Smaller than "milli." You have to go down below the width of a human hair, or one millionth of a meter to get a sense of just how tiny nano-particles are.
A decade ago, this investment firm generated ample buzz, and its shares soared past $25. These days, the stock trades for around $5. As it turns out, few companies have succeeded in commercializing the technology. It didn't help that the investment firm kept finding new opportunities throughout the last decade, but saw only one holding go public.
But the timing may finally be good. Harris & Harris currently owns stakes in 33 businesses (half of which currently generate revenue), and the process of bringing them public or selling them finally appears underway. A pair of holdings, Neophotonics (Nasdaq: NPTN) and Solazyme (Nasdaq: SZYM) recently completed IPOs.