A little more than a decade ago, a simple idea for a website began in a young man’s Harvard dorm room.

It would provide a way for people to connect that the world hadn’t seen since the Internet became mainstream in the 1990s.

In just four years, more than 100 million people would visit his website. And by the end of 2013, more than 1.2 billion — or more than one-sixth of the world’s population — would sign on, many on a daily, even hourly basis.

The company was officially listed on the Nasdaq in May 2012 and was valued at a whopping $104 billion on its first day of trading.

And on September 9, 2014, the company’s market cap soared past the $200 billion mark — officially making it the 14th most valuable company in the United States — worth more than decades-old stalwarts like Coca-Cola, AT&T, Pfizer, IBM or even Bank of America.

The world has rarely seen such a growth story as Mark Zuckerberg’s creation, Facebook (Nasdaq: FB).

Had you bought Facebook shares when they first traded on May 17, 2012 and held on until today, then your investment would have more than doubled in just over two years.
 

But what if I told you that you some investors made a 5,000% return from their investment in Facebook?

As we explained last week, most of the money in initial public offerings (IPOs) is made before a company goes public. As my colleague Jimmy Butts explained:

The story is no different for Facebook’s private investors.

In fact, shortly after Facebook’s initial public offering, several early investors who bought shares before the company went public made millions.

My colleague Bob Bogda once wrote about Peter Thiel, one of Facebook’s first investors. Thiel put $500,000 into the company back in 2004. By 2012, after the company went public, the value of his shares grew to $2.5 billion — worth nearly 5,000% more than when he originally bought them.

In August 2012, three months after the company went public, Theil sold 20 million of his shares and made $400 million in profit. And that was on top of the $640 million he had made selling his shares at the IPO.

Bob also wrote about David Choe, an artist who painted murals on the walls of Facebook’s original office. In lieu of payment for his work, Choe accepted private stock in Facebook in 2005. By August 2012, his shares were worth roughly $200 million.

I understand that many of you may be thinking, “Good for them, they were lucky enough to be able to invest in a promising private company before it went public and took off.”

Indeed, it’s nearly impossible for most investors to do this.

Our resident income expert, Nathan Slaughter, who has studied the successes of investing in private companies extensively in his latest research, says that the traditional way to invest in these companies is through venture capital firms — which have stringent entry requirements (Hint: you need to be rich).

As Nathan notes:

These requirements bar all but the top 6% of the wealthiest individuals from investing in venture capital firms.

Fortunately, Nathan found a backdoor way for any investor to make money from private companies, by investing in what are called business development companies (BDCS) — the firms that lend capital to promising upstarts.

Nathan likes to think of these firms as “Private Banks.”

In exchange for the loans they give out to small private companies, Private Banks are able to charge double-digit interest rates or even command an equity stake in the company they’re loaning to.

So how could you have used a Private Bank to buy Facebook before it went public in 2012?

You could have invested in Hercules Technology Growth Capital (NYSE: HTGC), a publicly-traded BDC that bought shares of Facebook in 2011, while it was still private.

According to Hercules’ 2011 annual report, the firm bought 307,500 shares of Facebook for nearly $9.6 million in December 2011. That means the firm was able to invest in Facebook at roughly $31 per share — 22% less than what regular investors paid for shares when the stock went public in May 2012, and a far cry from today’s $76 share price.

On top of Facebook, investing in Hercules would have also given you exposure to many other promising upstarts. In the past, the firm has owned recognizable names such as the real-estate search company Trulia, Ancestry.com, Gazelle.com and several other private companies operating in the energy, technology and pharmaceutical sectors.

In other words, when you buy shares of a Private Bank like HTGC, you’re effectively investing in a basket of some of the world’s fastest-growing businesses — while they’re still private.

And it pays. The massive returns these Private Banks generate from private businesses aren’t taxed by the Federal government, meaning they are profit-generating machines. But in exchange for the tax break, these firms are required to pay out 90% of all profits in the form of dividends.

That means these firms are able to pay some of the highest dividend yields on Earth. The average Private Bank pays an 8% dividend yield, but it’s also fairly easy to find some yielding over 12%.

The returns are also lucrative. For example, over the past five years, HTGC investors have earned over 132%, including dividends. And today, the firm pays a dividend yield of 8.5%.

Hercules is just one example of a Private Bank that’s generated massive returns for investors by investing in promising upstarts like Facebook before it went public.

In Nathan’s latest High-Yield Investing research, he’ll show you how Private Banks have beaten the market for the past five years, and how he’s using these special investments to harness the growth of private companies and earn dividend yields up to 12.5%. To get all the details, I invite you to watch his special presentation.