As an asset class, Start-Ups historically have returned 22%+ per year
Higher than all other asset class
Over the last 20 years the best performing asset class was Seed stage investments in start-up companies. As an asset class, Seed stage companies had a higher average annual return (22% per year) than every other asset class including Hedge Funds (18% per year) or the S&P 500 (15% per year) according to a study of early stage returns by the Kauffman Foundation.
Early Stage Investing Is Also The Most Risky
However, it is well known that start-up companies are also the most risky and have a high probability of failure. According to a study by the Kauffman Foundation 52% of Angel deals lost part or all of the investment.
— Rob Wiltbank “Returns to Angel Investors in Groups” Kauffman Foundation 2007
Seed Also Most Risky Asset Class
The study reveals the following outcomes for angel investors connected to angel organizations:
- The average return across all angel investments in this study is 2.6 x (260%)
- Only 1.3% of companies had outlier “Black Swan” exits over 100x
- The average return without the “Black Swan” outliers in this study is 2.2 x (220%)
- The average time to exit was 3.5 years
- The Internal Rate of Return (IRR) was approximately 27%
- This IRR compares favorably with other types of private equity investments
- 52% of all of the exits lost part or all of the capital invested in the venture
- 48% of investments had grater than 1x (positive) returns
- 25% of deals produced returns of 2x – 5x
- 7% of the exits achieved returns of more than 10x the money invested
- 45% of the companies financed had no revenues at the time of investment.
- 68% of the deals that took follow-on investments resulted in a loss of capital.
- Taking follow on Venture Capital reduced outcome certainty with no increase in average exit value.
Key Benefits for Investors:
- Easy Diversification (5 – 20 stocks) in a Theme
- Access to selected high quality deals
- Lower cost ($25K) than average Angel deal ($50K+)
- Better Risk-to-Return Ratio than individual start-ups
- Professional Stock Selection & Portfolio Design
- Potential Secondary Market Liquidity
- Low correlation with other asset classes (e.g. public stocks)
- Side-by-side “Double-Down” investment opportunities
- Potential early liquidity via Online Exchanges after 1 year
There are substantial risks in investing in Venture Investment Portfolios. Please refer to the Private Placement Memorandum and disclaimers for a more detailed description.
Specific Risks include:
High risk of partial or complete investment loss.
- All invested companies could fail. (smaller, normal font)
- There is no guarantee of any capital return.
- High Risk investments are not Suitable for all investors
Investment may be illiquid
- No secondary market exists for VIP ownership units, and there is no guarantee that any such market will be
available in the future.
Investment capital subject to management fees
- Management fees start at 2.25% and include a 20% carried interest.
Fees on Invested Capital
- Initial Fee: 2.5% (5 years)
- Reduced 0.25% each year after
- 20% Carried Interest