Posted on 25th August, 2015
Posted on 25th August, 2015
by James Codling
Making Private Equity public: Why I created VentureFounders with a mission to accelerate the Participation Economy
It's a well-known fact that the Private Equity (PE) and Venture Capital (VC) market in the UK is a closed market to all but a few ultra high net worth individuals and institutional investors. You may unwittingly and unknowingly gain some exposure through your pension fund but generally, unless you have several hundreds of thousands of pounds to spare, you have so far been unable to directly access this asset class.
You may well ask why you would want to get exposure to these types of investments when there is so much choice out there anyway? For a start, the companies they back form a large and growing part of UK plc. In 2011, PE and VC funds backed 3,800 UK businesses and those businesses employed a staggering 515,000 people directly here in Britain. They’re also businesses that are, in the main, growing.
PE and VC investments can yield high returns and can be a great addition to a balanced and diversified portfolio. According to the BVCA, this market has consistently outperformed its competitors and as an investor over the last 10 years you would have seen a return of 14.9% IRR vs the FTSE all share benchmark of 7.9% if you had invested in PE. BVCA research also covers the VC market and, over the last three years, 2002 vintage funds and onwards have generated an 11.1% IRR having recovered after the fallout from the .com bubble in the late 90s.
It is a risky space to invest in but, importantly, it is not start-up capital, which is where most of the equity crowd funding market is currently focussed. Failure rates for start-ups are incredibly high. However, PE and VC fund managers tend to support more developed businesses that either have a track record or are past proof of concept and the risks, while still high, are normally more measured. Like any asset class, building a diversified portfolio is still critical for fund managers to offset and manage any losses in their portfolio.
Private Equity and Venture Capital fund managers have the requisite skill set and experience to identify attractive investment opportunities, and importantly have the deep pockets needed to keep supporting those businesses as they grow and develop. That is an important factor to consider, as ultimately growing businesses need additional capital to sustain that growth. Identifying the best fund managers when looking to allocate your resources to this sector is key as, like any industry, not all are the same quality.
Sharing the value
I have worked in and around the Private Equity market for the majority of my career. I believe that now is the right time to shake up this market and allow sophisticated investors direct access to this asset class. Advances in technology and the Alternative Finance revolution are converging to make that dream a reality.
VentureFounders is at the forefront of the change and we believe that our Venture Equity model is unique in allowing investors to get access to high quality investment opportunities from leading VCs and Angel networks.
Unlike ‘equity crowdfunding’ our approach is to seek out the best investment opportunities for you, ones that are past proof of concept, ones that we believe in and those we would personally invest in. A large number of these opportunities are VC backed, allowing you to get direct access to this asset class and from as little as a £1,000 investment.
It’s time to make Private Equity a little less private; it’s time for Venture Equity to support the Participation Economy.