It is a little early to call it a trend, and it seems to be primarily focused in London, but more VC firms are choosing to become public companies, following a trend that private equity has understood for quite a while. The latest is Nic Brisbourne’s Forward Partners, a UK-based seed-stage investor. They are following in the steps of Draper Espirit, which has been public for some time.
I am very self-interested here. I firmly believe that the venture model is going to be disrupted by a scalable, data-driven venture-tech approach and that a public listing-based asset class will be a big part of the disruption.
Why? It really comes down to the venture model and why a company structure with liquid stock is a better mousetrap.
Venture is a bit stuck in a 19th Century artisan model, and that is being kind. Superstar individuals are the unit of account looked at by LPs.
But, as stated in the Financial Times piece by Richard Waters
It’s time to stop talking about venture capital. It’s not that risk capital for new growth companies is on the wane — far from it.
Rather, the term, which conjures images of enterprising investors seeking out visionary young founders in their garages, fails to capture a powerful new reality.
Capital formation in the growth sectors of the digital economy has entered a new realm. Just about everything has changed: The nature of the capital that is fuelling growth in technology and digital markets, the suppliers of that capital, and the companies that are benefiting from this deluge of cash.
In short, a new private finance system has emerged from the old VC model, and a new and more diverse group of financiers has the whip hand over what has become an important engine for the future of business.
The extent of the transformation is clear from the latest half-yearly investment trends. The sheer scale of the private markets is one striking feature. The $139bn put to work in the first half in the US (sic, it was in the 2nd quarter)
was nearly as much as the whole of last year, according to figures from CB Insights
— and the 2020 figure was itself an annual record.
Great investors like those on Forbes Midas list
do well as representatives of the artisan approach but are they the last of the dinosaurs?
With startup innovation becoming global and enormous, and with the three asset classes within venture becoming more clearly differentiated (seed, venture, and growth), the way to play the game is changing. The time is ripe to evolve how startups are funded and to significantly expand who gets to own their stock.