Lightspeed, the bigger question has to do with the actual venture you're being invited into -- how risky is it?
I happen to think investments in private companies are a great form of diversification and a great way to build wealth, but you have to understand and be able to manage the risks.
We made our ER 'wad' mostly through selling a company I founded. But I founded several and only two were reasonably successful, and one has made money. The rest were "tuition payments" for learning about private investing.
I think 5% -10% of an ER portfolio can be in private investments, (plus more in commercial real estate, hedge funds etc -- say 20% in risky or illiquid stuff overall). That to me feels like good diversification away form the simple traded stocks and bond securities.
But if you are younger, building up your savings (as opposed to taking out a safe withdrawal amount each year), and actively involved in something you know about, I think you could reasonably put more of your eggs in one basket.
Before investing, it is worth trying to speak to angel investors, people in the same industry, maybe some venture capitalists etc etc to try to make sure your investment passes some of the obvious due diligence screens. Local angel networks are all over -- ask local accountants or lawyers who work with this sort of company for leads to others who can help you start to fill in some of the gaps in your knowledge.
Good luck with it!
I happen to think investments in private companies are a great form of diversification and a great way to build wealth, but you have to understand and be able to manage the risks.
We made our ER 'wad' mostly through selling a company I founded. But I founded several and only two were reasonably successful, and one has made money. The rest were "tuition payments" for learning about private investing.
I think 5% -10% of an ER portfolio can be in private investments, (plus more in commercial real estate, hedge funds etc -- say 20% in risky or illiquid stuff overall). That to me feels like good diversification away form the simple traded stocks and bond securities.
But if you are younger, building up your savings (as opposed to taking out a safe withdrawal amount each year), and actively involved in something you know about, I think you could reasonably put more of your eggs in one basket.
Before investing, it is worth trying to speak to angel investors, people in the same industry, maybe some venture capitalists etc etc to try to make sure your investment passes some of the obvious due diligence screens. Local angel networks are all over -- ask local accountants or lawyers who work with this sort of company for leads to others who can help you start to fill in some of the gaps in your knowledge.
Good luck with it!