Is anyone putting any money into venture capital funds?

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PurpleArc
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Is anyone putting any money into venture capital funds?

Post by PurpleArc » Sun Apr 07, 2019 3:38 am

Has anyone put any money into VC funds before - those kind for high tech silicon valley stuff.

How did it go?

Valuethinker
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Re: Is anyone putting any money into venture capital funds?

Post by Valuethinker » Sun Apr 07, 2019 5:20 am

Not well. This was the dot com era.

You will need to be an accredited investor in SEC rules. Your taxes will get complicated

You should read the Kaufman Foundation report on VC investing. Also in one of David Swensens books.

The short answer is it is highly likely your investment will under perform the Nasdaq. The vast majority of venture funds do.

If via work or business relationships you have access to the top funds then its different. But not many do.

You can buy a QQQ etf a lot more easily and with far lower cost.

If you do go into VC funds try to wait for the cycle to peak VC funds raised in a slump tend to have better performance.

Btw you typical lock in see Kaufman report will be 12 years plus. It will be a long time usually before you see your returns (typically not until year 5 plus).

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curiouskitty
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Re: Is anyone putting any money into venture capital funds?

Post by curiouskitty » Sun Apr 07, 2019 5:38 am

Valuethinker clearly has more experience than I do. I just wanted to point out while tracking share prices for unicorn startups that I saw a number of public funds that had large positions in the many unicorns that are looking to IPO soon. Contrafund and a few other Fidelity funds, for example, but also from lesser known / regarded fund companies like Hartford.

Those investments are on track to yield huge returns so if the rest of their investments were decent than I imagine the funds are doing well but of course the large batch of unicorn companies waiting a long time to go public was probably an anomaly so hard to say going forward.

If you’re looking to get in on companies before they go public, it may be the easiest way to get started.

Skiandswim
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Re: Is anyone putting any money into venture capital funds?

Post by Skiandswim » Sun Apr 07, 2019 10:36 am

As noted, direct investment in VC Funds requires being an accredited investor along with typically large investment minimums (>$1M with several proven firms) and relationships. Angel Funds are easier to access, but risk is extremely high for first round firms.

Performance is all over the map. A small research paper of PE returns (tables 1-3 show IRR and standard deviation) http://hobergphillips.tuck.dartmouth.ed ... _Index.pdf

My experience being directly involved with startups is slightly different. You can better assess risks and potential returns if in a field you have expertise. You may have an opportunity to assist the firm as an advisor. You are directly investing your money or time. Exits can take 5+ years (if successful). Definitely not a recommended investment approach for most people.

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