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Investment opportunities that provide 15% return exist in the public markets with easy liquidity options, so what is the benefit of trying to squeeze that out o
by tempsy 7y ago
Investment opportunities that provide 15% return exist in the public markets with easy liquidity options, so what is the benefit of trying to squeeze that out of a private company where you can’t sell unless the company goes public or you try to find a buyer on the secondary market? Unless the company pays out a dividend I don’t see the appeal - usually VCs trade liquidity for the hope of massive returns that aren’t typically found in public markets.
- Ancalagon 7y agoWhat public investment continuously returns 15% yearly?
- icedchai 7y agoAlmost any tech heavy ETF such as XLK or VGT will get you there. 10 year yearly returns are over 15%. For less risk, you could do a total stock market index like VTSAX (10 year returns around 13%.) Nothing is guaranteed or "continuous" though. This is less risky than investing in a single, private company that probably has little liquidity.
- fnord77 7y ago> VTSAX the past 10 years, yeah. but the prior 10 years were much worse.
- icedchai 7y agoTrue. But do you think they were better for private tech companies? Maybe if you lucked out with the next Google. More than likely, you got a dot-bomb that lost 90% of its valuation and was sold for pennies on the dollar...
- pavlov 7y agoPrivate tech companies growing at 15% were not the "dot-bombs".
- icedchai 7y agoBut many, many others were, or did "okay" but got nowhere near 15% growth. What makes you think you invested in one of the better ones? Were you around during that time? Everyone thought they were going to have the next Amazon. Most folks wound up with Pets.com.
- pavlov 7y agoI was around, just barely — had my first startup job in early 2000. There certainly were a lot of bad companies without meaningful revenue seeking and getting investments, just like today. But if you'd invested only in profitable small software companies doing 15% growth back in 2000, I think you'd have done well.
- robjan 7y agoLooking at 10 year returns isn't good enough because we have been in a bull market for over ten years. You need to increase the horizon to get more accurate returns
- tempsy 7y agoWhy would a private SaaS that sells to companies do better than the public markets in bear market? If anything if the market suddenly turns then holding a stake in a company that is illiquid is worse because you can’t sell if you need to.
- tomkubik 7y agoBeing (1) private, and (2) moderately-sized, allows you to adapt more quickly - same reason why buyouts of public companies usually end with delisting. Useful thing in a downturn!
- hogFeast 7y agoThis is going to be one hell of a bear market. Can't wait.
- deleted 7y ago[deleted]
- xyzzy_plugh 7y agoUsually, if we're referring to SV VC, but there are others. Bain is notorious for squeezing dividends out of investments and they're categorized as Venture Capital. Traditional private equity, ala Berkshire Hathaway, is still pretty prevalent. There are plenty of self-described VCs who aren't necessarily looking for a 10-100x return amongst 100 small investments, but 2-5x returns across dozens of investments. The vast majority of companies will never have a significant exit event triggering liquidity (IPO, M&A). Does that mean they're not worth investing in? At least with private equity, you hopefully have some ability to influence those steering the ship, and get to avoid all of the regulatory hurdles. Opaque quarterly reports and short-sellers aren't exactly encouraging.
- tempsy 7y agoBeing a tiny seed fund means you are likely a minority stakeholder in most of the businesses you invest in. To compare what these people are doing with a small amount of capital e.g. $50k to $100k check to Blackstone is a wild stretch.