I’m familiar with the venture world as a venture investor, but I’m also intimately familiar with a different world - and in that larger asset management world, it turns out venture is only a tiny, almost insignificant piece of a much larger pie.Ĭourtesy of IASG: How large institutional investors allocate capitalįor larger institutional investors, venture capital represent < 5% of their overall allocation. And they’re in turn surrounded by demi-gods, smaller funds with “only” a few hundred million in AUM.īut what if I told you, many venture capital funds have no reason to exist? VCs take high risk / high reward bets in companies - knowing that most will fail, and perhaps 10% will return sky-high returns that justify the funds’ overall existence.Īnd in this world, the firm with a few billion in assets under management (AUM) rule supreme on Olympus - they realize the dreams of a few, and crush the dreams of others. Promising founders raise money to pursue a mind-blowing market opportunity, design a giant competitive moat, and create new industries from scratch.Īnd of course, venture funds appear to meet that need. In certain parts of the world (and if your area code starts with 510, 415, or 408, you’re absolutely in that part of the world)… you can easily conclude venture is the only way to build a business. How a hedge fund manager launches a venture fund.
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