Where are investors investing?
More than 8,000 venture-backed companies received a combined $85 billion in funding in 2017, representing the highest annual total since 2000. As stocks, real estate investments, and venture capital reach record highs, what are investors thinking about where to invest?
The answer depends on the type of investor:
• Large funds such as university endowments, pension funds and funds-of-funds have been allocating a part of their portfolio to venture capital for many years now and have seen success. Universities like University of Minnesota, Stanfordiii and Yaleiv have done very well with venture investments. For fiscal year ending June 2015, the University of Minnesota invested 26.1% of its capital in private investments, with 14% of the private allocation invested in venture capital. The overall fund returned 5.7%, private capital
returned 16.1%, and venture capital returned 28%.v This has increased the appetite for venture investments among endowments.
• High net worth individuals who have built their wealth in tech are reinvesting in tech venture funds.
• High net worth individuals who have traditionally invested in the stock market, real estate, or private equity, are warming up to tech venture investing.
• Family offices are increasingly doing the same. In a recent tally of the attendees of a US family office event, 35 out of 60 firms expressed interest in venture capital.