In the public markets, investors often have to choose a side: high-dividend vs. high-growth. The same goes for traditional alternative asset classes like real estate or venture capital. Or even more exotic ones like wine and art.
While cash flow materializes the moment it’s paid and hence reduces risk, it gets almost always immediately taxed, thereby reducing your compounding reinvestments. On the other hand, appreciation can be volatile, as recent events in the tech world and VC space have shown – or the JP’s Nikkei 225, still trending way below its peak from ’90(!)
❓Why not aim for both via Micro PE?
There are plenty of ‘nano cap’ digital asset classes in the private markets, like Content Websites, SaaS, eCom, Kindle Direct Publishing, etc., which can – when acquired, onboarded and operated right – combine cash flow and appreciation:
> when acquired at a 3x EBIT/net-profit multiple, the asset will bring in a 33% return p.a.
> in addition to this, many assets have plenty of potentials to grow. If an investor can tap into these low-hanging fruits, he can benefit from cash flow as well as appreciation, which is then again leveraged by the multiple the asset/company is trading at
Is this the reason why more and more Micro PE’s in all shapes and sizes are popping up as well as diversified (=risk-reduced) funds, e.g. via Flippa Invest or WebStreet, are booming?