The iSelect Approach for Family Offices and Institutional Investors
Venture capital investing has long been known to be one of the most reliable ways to build and maintain wealth in this country, with the potential to deliver high investment returns. For generations wealthy families have used venture, investing in successful companies before everyone realizes they will be successful, to increase their net worth.
But, investing in venture can be difficult for family offices and smaller institutions. Many try angel investing, but deal flow and diligence can both be issues. If you are not seeing enough deal flow, then you can’t build a diversified portfolio. And diligence is time consuming, even if you do have the right expertise to evaluate that given deal. If you are large enough to consider your own team for direct investments, that brings with it its own set of issues.
The next step might be to try to get into a fund. Traditional funds often have very high minimums — $1 million or more — if you can even get an allocation. In order to be continuously invested in the asset class and avoid the risks of a particular business cycle, you must “ladder” funds over a number of years (often 5), requiring more diligence on the fund, subjecting you to more fund manager risk, and multiplying the minimum investment by 5, if you can even get in. And, what do you do about sector diversification? Do you pick a generalist or a specialist? Or stage diversification? Should you choose Seed, Series A, Series B or even later stage growth capital?
And then there are the capital calls. Often you must allocate a portion of the capital upfront and pay a fee on it even though it has not been invested. Additional capital will be demanded when investments are actually made. Unfortunately, the timing of these capital calls has nothing to do with your availability of cash, so often you must overweight in cash or near cash securities to have cash available, suboptimizing the return on your overall portfolio.
But not all venture funds are created equal. iSelect is a unique type of venture capital fund with some unique advantages.
Evergreen Fund Structure
As an evergreen fund, the structure of iSelect means that family office and institutional investors can invest whenever they want. They do not need to ladder multiple funds in order to stay fully invested at all time. This not only makes oversight easier for fund managers, but it also eliminates the risk of missing out on full investment down the road due to fluctuating availability or oversold rounds.
No Vintage Year Risk
With iSelect, you don’t need to worry about the impact of investment cycles or the business cycle to your venture investments. You can spread your investment across multiple years and multiple companies, allowing you to maximize potential returns while minimizing the downside risk of investing in venture-backed companies.
Deal Flow / Diversification
iSelect sources hundreds of venture investments each year from proprietary deal sources across the U.S. iSelect then selects the top 2-3% of those deals that meet strict qualifying criteria for investment. This provides you with the ability to curate a diversified portfolio.
Each company in the iSelect portfolio is subjected to an extensive three-tiered due diligence regime, including review by a FINRA compliant broker-dealer, taking the hard work of vetting potential investments off of fund investors. Once selected for review by our Venture Team, potential companies are studied by an industry-specific Selection Committee that’s composed of independent entrepreneurs, business executives, world renowned scientists and researchers, and accomplished venture investors in market niches including Healthcare, Agriculture, Energy, Technology and more, before being submitted to iSelect’s Investment Committee for final review.
In addition to lower minimums than traditional funds — accredited investors can commit as little as $5,000 per company, allowing for the creation of a diversified venture portfolio of 20 companies for as little as $100,000 — iSelect offers additional benefits for investors who are able to make larger commitments, including specialized deal flow review and other services. The fund also does not issue capital calls, allowing investors to put money to work as it comes available, and enables all investors to specialize in the types of deals that are right for them by diversifying their holdings across companies, industries and deal terms.
The Flexibility to Specialize or Diversify
Want to invest across multiple stages or just one? You can do it within the iSelect platform. Get access to Seed, Series A, Series B, and sometimes later stage companies. Want to invest in multiple sectors or just one? Either way, you can choose a diversified portfolio across our four main areas of focus, or pick just one sector that is particularly attractive to you.
Pro-Rata Participation Rights
These rights are typically negotiated as part of an early stage investment, giving Seed investors the opportunity to continue to invest in later rounds so that they can maintain their ownership stake as the company grows. They give an investor the option, but not the obligation, to invest additional capital in follow-on rounds of fundraising. As a result, the investor is able to effectively “double down” on the most successful companies in their portfolio without dilution in later rounds, maintaining their stakes even over the long timeline of today’s venture-backed companies. iSelect allows investors access to these participation rights in later-stage deals.