If you want to invest in venture capital, I think that it is more beneficial to invest in a venture capital fund than in individual private companies. By investing in a venture capital fund, you not only reduce your chances of losing money, but also increase your chances of getting a positive return.
I have been a venture capitalist since 2001 and strongly advise against angel investments. Most of the time, you will end up losing the vast majority of the time. In addition, if you lose, you are likely to lose all the money invested in the private company.
Over time, my takeover has only promised to avoid investments in individual private companies. The main reason is my experience as a commander in several closed venture capital funds.
I have seen the results, which companies are successful and which fail. The chances are not for the individual investor of the private company. As an investor in a private company, you need to diversify. And the easiest way to diversify is a venture capital fund.
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Great Opportunities to Get a Venture Investment Winner Right
As a commander, I have only seen a quarterly update from a small venture capital fund for the early stage. I had not visited one for over a year, because I prefer not to intervene completely as soon as I commit and send capital. Not having to think about how my money is invested is one of the reasons why I invest in private funds and am willing to pay their commissions.
The venture capital fund invests mainly in seed rounds and some series A rounds. These financing rounds usually take place within 1 to 3 years after the company is founded, which means a higher risk. However, if the companies are successful, the returns could be huge. All founders have impressive cvs, and the problems that companies want to solve look diverse.
Just know that marketing material always makes an investment seem versatile before you invest in something. But, of course, not all investments work, so diversification is important.
Venture capitalists know that the chances of winning are small
During the update, I was shown a slide that I cannot share here for privacy reasons. It shows a bubble chart of 60 companies in which the fund had invested. A small bubble represented the 6 expected winners, a medium bubble represented 30 companies that would survive with careless outflows, and another bubble represented 24 companies that were predicted not to succeed.
What surprised me was that, despite the fund managers’ willingness to invest in 60 promising companies, they already expected to lose 100% of their investments in 40% of companies (24 out of 60) and 50% of companies (30 out of 60). to generate little return or to lose money. Only 10% of the company should be profitable.
