“Predictions are hard, especially about the future.”
“I will gladly pay you Tuesday for a hamburger today.”
“If you stop at general math, you’re only going to make general math money.”
“I’m not lucky… I’m smart, I’m talented, and I work really hard. Don’t call me lucky, call me a badass.”
Practical Venture Capital (PVC) is a Silicon Valley VC firm focused on venture capital secondary. We buy LP and GP interests in early-stage venture funds, and direct secondary in breakout portfolio companies. Our investors get discounted access to top-performing funds with established winners and unicorns, and we cut the typical 10-15 year VC holding period in half.
Our “Skip the J-Curve” strategy buys venture portfolios and companies when they are 5-10 years old, after winners have emerged and losers are marked down or written off. The first 5 years of most VC funds are usually high-risk with many failures. However, in later years portfolio value is more stable and concentrated in fast-growing companies, with exits and IPOs likely in 3-5 years.
How do you make a billion in Venture Capital?
Start with 2 billion...
then wait 10 to 15 years.
Venture Capital isn’t practical.
Most startups fail. Most companies aren’t Facebook. Most VC funds don’t return 3x or 20%.
Over the past 20 years, we have started and managed more than 20 microVC funds and invested in thousands of startups in over 50 countries around the world. Around 2% of these companies succeeded beyond our wildest dreams and generated returns of 100X or more. Another 20% did well and returned 5-20X. About half of them returned
IPOs take forever.
Venture Capital is a challenging asset class for most investors, primarily because it takes so damn long. The average IPO takes about 9 years start to finish, and VC funds often take up to 15 years or more to exit completely.
While it’s great to see startups grow into unicorns and IPOs, it’s less exciting if your hair turns gray (or falls out) while waiting for them to get there.
Skip the J-Curve.
Venture Capital is a high-risk game, especially in the beginning. Most startups fail within 5 years, and most VC funds end up with ZERO unicorns. However, after the first 5 to 7 years, you can usually tell if a fund is going to do well (or not).
What if you just show up at halftime and bet on the winner?
That’s the core strategy of venture secondary: Skip the J-Curve. Avoid the early risk and uncertainty – just buy the funds and companies already doing well.
Some fans need to leave the game early. Why not take their seat?
Unicorns on Sale.
Successful funds usually end up with just a few big winners — companies that get traction, grow faster, and (hopefully) turn into unicorns and IPOs. Often one unicorn may end up driving most of the value, in what is called a power law distribution.
Some investors may want liquidity before the fund terminates (which may take 12 to 15 years or more), and they'll sell at a discount to exit early.
Fund secondary is a buyer’s market because it’s tough to determine valuation and because there are usually fewer buyers than sellers. Downturns and uncertainty increase discounts even further.
Money Back Faster.
It may sound obvious but when you arrive at halftime the game just seems to go a lot faster. The same is true in venture capital — after the fund gets past the first 5 to 7 years, exits and distributions happen faster as well.
If you buy into a fund after distributions are starting to happen, it takes less time to get back your principal and less time for the fund to generate returns.
Just cut the VC fund in half — get your money back faster.