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Reasons why I think it’s not sexy:
– Gatekeeping (most VC’s require high minimums, the hassle of going through an advisor etc – compare this to opening a brokerage account and chucking money in an S&P tracker, all while sitting on the toilet with your phone in hand)
– Even if you do it, what are you going to be talking about? The almost non-existent financial info about the companies the VC fund invests in? Basket allocation and blend? Truth is, if it’s a hands-off managed investment – I probably don’t have much of an interest in discussing about it at length
– If you have the knowledge and willingness to get involved EquityZen and other similar platforms are doing a fantastic job at providing access to private companies
Personally, because of the industry I work in, I have very strong convictions about particular companies and every time they raise capital I try to get involved directly through EquityZen.
Private equity has been impressive lately in a low interest rate / high valuation environment. If this changes how do you think private equity will be impacted?
The biggest problem with investing in VC is the dispersion of returns between top quartile funds, median fund returns and bottom quartile funds. On average VC is just not worth it unless you can get into the top performing funds like Benchmark. Otherwise you might as well invest in equities.
Hi, longtime value investor: the problem is that the vast majority of investors aren’t well equipped to pick individual equities of established companies, to perform adequate valuation exercises, etc., let alone evaluate completely untested, speculative opportunities with opaque financials.
Even as much money as I have, my experience with predicting certain developments is such that there are too many variables. When I wrote my paper on internet distribution of music, nobody could have predicted it would be a small acquisition of Casady & Greene and licensing of Amazon’s one-click patent that would change the market.
So to me, venture capital is both about appetite and capacity for gambling… If you’re Peter Thiel and you’ve got a few billion dollars, you can say things like, “drop out of college and go start up a company and I’ll give you $10,000” … because he can afford to make 10,000 $10,000 bets and see 9,999 of them fail just so he gets there first to that one that actually isn’t crap.
Most folks on this sub have far, far less money and experience… so they’re really in no position to take blind bets when they are just working up to basic financial stability. I would not even begin to look at VC/PE opportunities until I had at least $500-600 million in available investment capital.
The vast majority of VCs can’t beat the S&P500 before fees. After fees, the numbers look really bad. Unless you can get your money into the very best firms (like Sequoia, A16Z, etc), then there’s no point in trying. The whole VC game is a pump and dump, and the most important thing is being one of the best names, because the lemmings will follow big names regardless of what they invest in. So long as you manage to cash out before the crash, you should do fine.