Canadian Investors

By: Gonen Hollander Many individual investors and financial advisors may not have considered including venture capital as part of their portfolio because historically the minimum investment was in the millions of dollars. Relatively new funding platforms such as OurCrowd offer qualified individual investors an opportunity to invest in start-up deals with modest investments at the same terms VC funds receive. 1. Higher historical returns The most compelling reason to allocate a portion of your portfolio to venture capital is to improve your ROI: venture capital has historically outperformed the public markets. Compared with the S&P 500 and Russell 2000, Cambridge Associates US Venture Capital Index has consistently outperformed the two public market indices over any selected time horizon over the past 25 years 2. Follow the smart money The smartest money in the investing world includes venture capital in their asset allocation. Institutional investors such as pension funds and endowments are increasing their exposure to alternative asset classes in general and venture capital in particular. The Yale Endowment Fund, which is considered by many to be the gold standard...

By: Gonen Hollander Venture capital investments are illiquid and require a longer holding period.Increase in valuation is only realized when there is an exit or a follow-on round (12-18 months is the average cycle).Diversification is key – 20% of the companies will generate more than 80% of the returns Venture capital is a good way to diversify a portfolio: it can provide a hedge against market downturns and has higher potential returns than the public markets. Nonetheless, there are things investors should keep in mind before making an allocation to this asset class. In this article, I mention a few of the things that investors ought to consider prior to investing in VC. Illiquid and long-term Pre-IPO investments by their nature are long-term investments. Hold periods range from 1-2 years for pre-IPO companies, 5-7 years for early growth, and up to 10 years for a traditional VC fund. While liquidity events can happen sooner, you should plan for a lengthy holding period and invest money that you will not need in the near future. Changes in valuation Unlike public...