Draper Esprit – A Publicly Traded European VC Firm

You’ll often hear wantrepreneurs complain about how their genius is being held back by venture capitalists (VCs) who don’t throw money at them because of <INSERT PERCEIVED INJUSTICE HERE>. The truth is that venture capital investing is exceptionally risky. Harvard Business School senior lecturer Shikhar Ghosh’s research showed that 75% of startups never return cash to investors. If three out of four stocks you invest in might be worthless as soon as you click the buy button, you’d probably tread lightly too.

A family office recently asked us how to invest in startups. Not buying shares of startups on the secondary market, but actually being able to participate in funding rounds. Unless you’re someone whose name is recognizable in the startup world, that’s not going to happen. The next best alternative would be to invest alongside a venture capital firm. An HBR article on How Venture Capital Works talks about how venture capital firms typically work with large institutional investors only:

Investors in venture capital funds are typically very large institutions such as pension funds, financial firms, insurance companies, and university endowments—all of which put a small percentage of their total funds into high-risk investments. They expect a return of between 25% and 35% per year over the lifetime of the investment. 

These institutional investors aren’