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Small Venture Capital position
Old 01-10-2021, 07:31 AM   #1
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Small Venture Capital position

I just made a small investment in a venture capital portfolio that invests in local companies with growth potential. I am doing it out of a desire to support companies I know making products and delivering services I believe in, but also hope to make a reasonable return. When I use Search "venture capital" I don't see any threads or posts. I find that surprising. Am I using search incorrectly or are there really no others investing in venture capital?
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Old 01-10-2021, 09:21 AM   #2
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I would consider that more of a "giving back to the community" than an investment. I suppose you could always get lucky or happen to have invested in a local fund that has particularly good management but, in general, I would expect the returns of such a fund to be well below what I can expect to get in the stock market.

Thank you for caring enough to invest in new ideas and hopefully enough of them pan out to do well as an investment also!
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Old 01-10-2021, 10:24 AM   #3
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I worked in the field and as a result we have several investments. When I’m feeling generous, I ascribe a value of ~10-20% of their ‘valuation’, which is usually about what we invested. Mainly because of one potentially near term exit that I expect will return that. But in general, these are a zero in our portfolio. Room for upside, but not something I count on in any way. For a small mostly local fund investing on the early side, I would say that advice goes double (at least).
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Old 01-10-2021, 10:29 AM   #4
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Thanks for the responses. I will be happy if the investment doesn't lose money - that I get my initial investment back 10 years from now. Yes, I understand that means inflation will have eaten part of the original value, but my primary reason is "giving back to the community" and helping these companies survive. My investment is 2.2% of my portfolio. Are there any others on this forum doing something similar?
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Old 01-10-2021, 11:06 AM   #5
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I tried this (venture capital investment) once, and lost it all when the CEO that was hired by the firm embezzled funds resulting in bankruptcy. Even though I invested with the attitude that this was either going to the moon, or to zero, because of the circumstances of the loss I do have regrets. It was about 1% of my portfolio.
I have been offered other opportunities that I have turned down. I cannot foresee making a VC type investment again.
With all of that, good for you to support the community and good luck.
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Old 01-11-2021, 08:57 AM   #6
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I made a few of them back in the day. Three went to zero and one became a 30-bigger which I felt was luck and I collapsed the fun portion of the portfolio. It was a real connection to the community...

One of them I encouraged to shut down after getting the CEO to prove that his good idea was not marketable. That was satisfying because I saved him a lot more pain and money.
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Old 01-11-2021, 10:04 AM   #7
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Venture capital is not something that most individuals would invest in. I do know some very wealthy families that might invest in such start up businesses, however they often have full control of the companies or portfolios.

Most venture investments are coming from pension funds and institutional investors.

My best friend is a venture capitalist, and some companies he's built fast and liquidated them. But some companies have taken many years to build up and sell. And since these are closed corporations, they're not easily sold. Many are purchased by the management if they're profitable and fast growing. And some of their companies are not profitable and closed. It all varies.
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Old 01-11-2021, 10:39 AM   #8
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We have a small venture capital position. But it is my wife's venture!
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Small Venture Capital position
Old 01-11-2021, 05:35 PM   #9
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Small Venture Capital position

My DD is the CFO of a Silicon Valley VC. An investor in any of their funds must be ‘qualified’. When I asked her what ‘qualified’ means she once said that a private party must be able to sustain a loss of their substantial investment. Also private investors are known to the principals. I recall that one who was known to be a PITA was turned down.

As someone indicated earlier a large portion of the fund are institutional investors such as retirement funds and not all of them get a welcoming handshake.

The fund places a principal on the board of the firms they invest in. Good funds make substantial profits.

VC funds are not liquid, the investment is tied up for years.
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Old 01-11-2021, 06:13 PM   #10
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I have been in four or five deals mostly for the fun of it. Investments were maybe $50K average; not enough to really move the financial needle. One bust, one home run, several others probably averaged 20% compounded ROI. A couple were "blind pools" -- what we called them 20 years ago. Now they are Special Purpose Acquistion Vehicles or something like that. Both were run by a guy I knew, had made money with, and trusted.

I found them or they found me just through local networking. In most cases I knew at least one of the principals. There were no middlemen. 100% of my money went to buy company stock that I held in my name. All of the offering and promotional documents were laser printed on plain white paper.

I did get prospected by a supposed VC-fund one time. Nice mailing, follow-up call from super salesman. I told him that needing to sell to retail investors via a 4-color brochure was 100% guarantee that it was a stinky deal. Very short conversation after that.

I never thought of this as any kind of charity. They were just a fun investment, not betting the farm. I recommend doing them in moderation.
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Old 01-12-2021, 06:38 AM   #11
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Quote:
Originally Posted by Brat View Post
My DD is the CFO of a Silicon Valley VC. An investor in any of their funds must be ‘qualified’. When I asked her what ‘qualified’ means she once said that a private party must be able to sustain a loss of their substantial investment. Also private investors are known to the principals. I recall that one who was known to be a PITA was turned down.

As someone indicated earlier a large portion of the fund are institutional investors such as retirement funds and not all of them get a welcoming handshake.

The fund places a principal on the board of the firms they invest in. Good funds make substantial profits.

VC funds are not liquid, the investment is tied up for years.
Qualified means you have at least $1M in non-residence assets or greater than $250,000 in income, which the SEC believes will make an investor capable of discerning whether they can sustain a loss of their investment.
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Old 01-12-2021, 01:40 PM   #12
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I have considered trying my hand at small scale VC or even angel funding where I think the (relatively small) capital and (non-trivial) time investments I'd be willing to make would be impactful.

To date, I have not put forth the effort to find targets.
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Old 01-12-2021, 01:47 PM   #13
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My experience is that these startups are looking for money, not management help. You never know what you'll find out there, though. I'd suggest starting with attorney and accountant friends; they seem to be the first to hear of deals. There are also investor clubs where companies come and pitch, with any investments being made directly between club members and the companies.

I have lost track, but I know there have been some rules category changes for very small deals where accredited investor status is not required.
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