The Little Book of Venture Capital Investing: Empowering Economic Growth and Investment Portfolios

Chapter Five

Field Guide for VC Investing Options—Nonlisted

Nonlisted VC investment options are today primarily reserved for institutional and accredited LPs. Notwithstanding, this is likely to quickly change in the not too distant future and be an attractive investment option to the population at large, once the SEC rules and guidelines governing the JOBS ACT are clarified—we are all waiting!

—Lou Gerken

Irrespective of having knowledge of the nonlisted VC investment landscape, it will always be of paramount importance to right-size/right-fit the VC investment option(s) selected given the prevailing investment climate. To right-size/right-fit requires a sixth sense that only comes to the naturally gifted, the lucky, or, more aptly, through years of time-tested VC investment experience. Even the most knowledgeable investors select their best-of-breed fund managers in selected VC asset classes without really knowing how that VC investment strategy will perform over the ensuing VC fund term. This term is typically 10 years to invest and harvest returns and is known as blind pool investing. Notwithstanding this blind pool style of investing, the VC investment mantra has historically been to maintain an allocation to the asset class over time, as it has over the long term proven to perform better than traditional asset classes such as listed stocks and bonds.

Most types of alternative investments are not as liquid as stocks and bonds. These include the asset classes of private equity ...