Venture Capital, or VC investing, is essentially the same as private equity investing in private companies, save for the fact these are very young, or new companies. In some cases, operations may have not yet even formally begun yet. For the same reasons as P.E. investing and combined with the fact these are young and risky companies, this is a risky investment endeavor.
Objectives and Risks
Like most investments, mutual funds and pooled investment vehicles add diversification and a needed layer of safety for individual investors to play in the VC space. Large private companies these days even offer private shares to employees, which have made their way to the market place. Though no longer true startups, firms including Uber, Lyft, and Airbnb have shares floating among a growing community of private investors.
How To Buy or Sell It
Funds are the best first option. Private shares from employees on website exchanges are growing in popularity. Investing in VC startups is increasingly popular among crowdsourcing entrepreneurs, or accredited investors who pool their funds together.
Strengths
Stunning (though rare) potential upside
New or game changing markets
Diversification through Funds and growing private websites
Weaknesses
Illiquid investments
Accreditation needed for actual companies
Low success rates
Key Considerations
Liquidity: Low
Historical Returns: High
Inflation Protection: Medium
25 Investments: Zero-Coupon Securities
-
Managing WealthCashing In On The Venture Capital Cycle
Find out how VC firms make the market go round, and round and round. -
Personal FinanceHow to become a venture capital associate
Venture capital analysts are junior members at VC firms, but they typically receive compensation that is higher than other finance analyst positions. -
Managing WealthHow to invest in private companies
It can be tough to analyze a company that doesn't trade publicly, but there are several advantages to investing in private companies. -
InvestingHow to Invest in Private Equity
Private equity might be a pricey investment, but the payoff could be big. Here's why and where you should invest in private equity. -
InvestingWhat's the Next Big Thing for Venture Capital? (GOOG, FB)
Flush with a huge inflow of funds, venture capital firms are cautious about what startups to back. What new technologies are drawing the most VC funding? -
Insights5 Ways To Get Venture Capital Funding
Crowdfunding and online networking are just some of the ways you can find venture capital investors. -
InvestingBe Your Own Venture Capitalist With These Stocks
By doing some digging, there are ways for the average joe to become his/her own venture capital fund. -
Managing WealthPrivate Equity's Returns Are Tempered By Its Risks (BX, KKR)
Private equity firms adopt approaches to quickly hike up earnings and boost returns, but these investments come with big risks too. -
RetirementComing Soon: Private Equity In 401(k) Plans
The day will soon come when private equity is commonly found among 401(k) plan investment options. Here's who's leading the charge and what to watch for.