venturecapital

I came across an interesting discussion on "The Other App" recently that made me reflect on the dynamics of co-investing in private markets, and in VC in particular.

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Meghan Reynolds raised a great point: if many investors don't feel equipped to pick individual stocks in liquid public markets (as evidenced by the widespread adoption of equity ETFs), why do they assume they can successfully select illiquid private companies through co-investment?
https://x.com/MeghanKReynolds/status/1888638007395430854

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Heard from VC LPs this week - an observation on coinvest. 

In public markets, most investors I work with invest in public markets through funds or passively. Typically only the largest / most sophisticated are investing in stocks directly. 

In private markets, everyone invests…

Meghan Reynolds

The best, most-balanced answer I found, was Ann Marie Guzzi's, offering a compelling counterpoint: private markets are inherently less efficient, which might allow for better decision-making by those with access to unique information or opportunities. This inefficiency could justify a more active role in direct investments compared to public markets.
https://x.com/amguzzi/status/1888666621226414279

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Both perspectives resonate with me, and I think the truth lies somewhere in between. While private market inefficiencies can present opportunities, they also come with significant risks and require deep expertise.

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For most investors, being LPs and relying on skilled fund managers may still be the best course of action. However, for those with the right resources, TIME to dedicate to the asset class and knowledge, co-investing could be a way to enhance returns, if approached cautiously.

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This behavior is something I’ve observed firsthand during my 16-year career in private banking and (multi-)family offices within Private Equity. It was also a key focus during my time as an academic Venture Capital researcher, where I worked to educate Family Offices about the complexities of VC as a “tough” asset class, one that requires time and practice to navigate effectively.

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