We’re thrilled to announce the closing of our $15.3MM Series A round led by M13 Ventures, with participation from SignalFire, Bedrock Capital, Intera Capital, Secocha Ventures, and returning investors Broadhaven Ventures, Ulu Ventures, Urban Innovation Fund, Fika Ventures, Basis Set Ventures, Tusk Ventures, and Anthemis Group.
Although we just recently launched, over 200 investors have deployed >$125MM into venture fund products on the Allocate platform. We have also grown our team to seventeen team members across engineering, operations, and investment management who previously held roles at leading institutions such as SVB, First Republic, Icapital, Vistaprint, Hamilton Lane, Fidelity, and AngelList.
It’s hard to overstate the impact technology has had on transforming everything around us. Today, some of the fastest-growing and most valuable companies globally operate within the innovation sector. Trillion dollar industries are being transformed every year. And as companies continue to stay private longer, a substantial amount of value creation occurs in the private markets, leading to a Cambrian-like explosion of firms that focus on investing in private technology companies.
Once an industry reserved only for institutional investors, the number of interested investors in venture funds has also exploded as it has become clear that access to the private markets is a critical component of a well-diversified strategy for investors seeking to invest in technology companies. With over 11,000 family offices and over 10% of the US population qualifying as accredited investors, the supply and demand sides of the equation are larger than ever.
However, despite the growth in the private markets, successfully investing in venture is more complex than ever as investors need to consistently source, diligence, and access the best funds to justify the risk and illiquidity of private investing.
A recent study from Mckinsey using Burgiss Data shows the performance of venture funds from 2008–2018 (Burgiss uses LP data), and not surprisingly, the delta between the top and bottom quartile venture funds is higher than other asset classes. Investing in the asset category requires building a portfolio that consistently has top-quartile returns (otherwise, investors don’t get the necessary risk and illiquidity premium to justify the opportunity cost of a more liquid alternative such as the S&P 500). Note that while the median returns shown in this study are favorable for venture capital investing, we’d point out that the time-bound for this study coincides with the longest bull runs in history.
Large institutional investors such as Yale (where VC has provided 20%+ returns) have the human and capital resources to build great venture portfolios. These institutions can hire entire teams to source and conduct deep diligence and have significant capital bases to meet manager minimums without sacrificing manager diversification. Unfortunately, most investors don’t have anywhere near these resource and capital luxuries the top large institutional investors enjoy.
The exclusionary nature of venture capital fund investing also represents a growing issue for fund managers. As the industry expands, both in terms of fund sizes and the number of funds, managers will need to tap into new capital sources reliably beyond traditional institutions to raise efficiently. Firms such as Blackstone and Ares have dedicated strategies for high-net worth investor channels. This isn’t surprising given that total high-net worth capital exceeds $80T, which according to Preqin, will increase to $106T by 2025 , and this group of investors is generally very unallocated to private alternatives. However, most managers cannot dedicate the time and resources to efficiently source, let alone manage these high-net worth investors. As a result, managers are over-reliant on institutional channels to fundraise.
Allocate acts as the connective tissue between the supply and demand of managers and investors. For wealth advisors, family offices, or high-net worth individuals, our platform offers the complete institutional experience ranging from sourcing, diligence, deal execution, management, and via pooled vehicles, the ability to invest with the same purchasing power of large institutions (with minimums as low as $75,000). Fund managers also benefit from reaching the wealth advisory and family office segments without the friction of searching for suitable fits and the ongoing administrative management of sub-scale checks.
If you are interested in learning more or becoming an Allocate user, head to our website or email email@example.com.
If you are interested in ushering in a new era of private investing, click here to find open opportunities (but we are always looking for talented people in engineering, operations, and relationship management)!
The Allocate platform at play (using fictional firms and data here).
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