Venture can offer superior returns if done right. It’s also great fun and incredibly rewarding to back the next generation of entrepreneurs. So, what should you do if you want to benefit from the most exciting asset class, but aren’t sure how best to go about it? Here’s a quick summary of some of the options available:
1. Do it Yourself
The awkward truth is that most people aren’t good investors. Smart people who build great financials models don’t obviously make great investors. It’s one reason why 96% of actively manged funds underperform index trackers. Equally, entrepreneurs who are great operators and adept at building large companies don’t necessarily make for great investors. Growing a business is a different skillset to choosing investments and building an investment portfolio.
Inexperienced investors often spray money into investments that they shouldn’t have, with no methodology for supporting and monitoring their portfolio. Having just had an exit, they are inundated with offers and find it hard to differentiate. It can take years of losses before they realise there is a better way. Working with a quality manager like Nickleby can give investors the deal flow, expertise and bandwidth to maximise returns and leapfrog the years of painful losses and learning the hard way.
2. Family Office (FO)
Many FOs prefer to invest in profitable companies and are hesitant to lead venture deals. This is because they often lack the expertise required to source, assess and manage private company investments – similar to the challenges faced by the investment managers in direct deals.
3. Multi-Family Office (MFO)
MFOs specialise in managing diversified portfolios across asset classes such as equities, bonds, commodities, gilts and hedge funds. However, their generalist approach often limits their ability to excel in any single area – breadth of experience often means you don’t have the depth to overachieve in a single area. Accessing, evaluating and managing alternative assets – particularly venture investments requires specialised skills that most CIOs or Relationship Mangers lack.
4. Wealth Managers and Private Banks
While excellent for for corporate hospitality, they are less effective in identifying high-growth tech businesses. Their expertise lies in equities and fixed income – they can help you buy Nvidia or sell Microsoft shares, but private markets remain outside their scope of understanding let alone expertise.
5. Venture Capital (VC)
VCs prioritise capital deployment, raising larger funds to secure higher fees. Their strategy often involves spreading investments widely in the hope of finding the next unicorn. Founders generally dislike them due to their limited post-investment support despite promises made, and the performance of many VC funds continues to decline, with most failing to generate meaningful returns over an ever-increasing timeline.
6. Deal-by-deal Houses
These firms typically pool small-ticket investments of £25k from retail investors and focus on lower mid-market private equity or securing allocation in fund deals and secondaries. Often staffed by former bankers, they’re often more interested in boozy lunches than the discipline of finding, vetting and managing great companies consistently.
In summary:
There is a better approach. If you want to professionalise your investments but can’t find the right partner, we offer exclusive off-market opportunities, expert diligence and resources to build a high-performing portfolio. We invest our own capital in each opportunity and only earn a carry for upper-quartile performance. Very few professionals can deploy £5-15m into growth-stage technology businesses whilst adding meaningful value. Our entrepreneurial background and investor network resonates with founders, giving us access to the best opportunities. By combining expertise, focus and access, we help investors excel in venture investing and find alpha.