Silicon Valley is famous and successful for some very good reasons.
It attracts some of the best talent in the world, is a nexus for billions in available funding and is a one-stop shop for customers in need of any sort of IT technology.
But that focus is also one of Silicon Valley’s great weaknesses. The venture capitalists and entrepreneurs in Silicon Valley are all very, very good at what they do, but pretty much all they do are IT, media and entertainment technologies. Healthcare, manufacturing, agriculture, materials, automotive… all of these fields, and many more, are outside the realm of Silicon Valley. They are simply not a focus out there.
The truth is, in the United States there are 60 or 70 major industries that have sales in excess of $1 billion a year. And they are almost all being largely ignored by the innovation engine that is Silicon Valley.
That’s why iSelect focuses its investments in other parts of the country, taking the same principles that have worked so well in the Bay Area and applying them in St. Louis, Cleveland, Chicago, Memphis, Kansas City and more. This allows us to fund agriculture startups, animal health startups, logistics startups and many more.
Each part of the country has different skills, and we are essentially just taking the Silicon Valley model elsewhere. There’s no reason to compete with Silicon Valley; it is doing the job just fine.
iSelect for accredited investors
There is a disconnect in the startup funding ecosystem. Most ordinary Americans only learn about exciting new venture opportunities after it is too late to invest.
Perhaps the reason for this is that investing in venture capital is hard. It takes time and expertise to adequately source, identify, and monitor a portfolio of venture investments. Diversifying across several deals typically requires $1.0 million or more of investable capital. Monitoring venture investments requires constant vigilance. The task is unmanageable for most people despite the potential returns.
As the first build-your-own venture fund, iSelect solves this problem by managing the diligence burden for investors, providing diversification by allow minimum investments in a single company for as low as $5,000 and continually monitoring investments after.
We manage the diligence burden for investors: Each company in the iSelect portfolio is subjected to an extensive three-tiered due diligence regime, including review by a FINRA registered 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.
Earn venture capital returns: iSelect is the first investment vehicle that affords accredited investors access to an evergreen portfolio of venture investment opportunities that have been thoroughly vetted by a committee of successful entrepreneurs, domain experts, and professional venture investors. We allow accredited investors to realize the potential to earn venture capital returns via a product that is diversified and risk-managed.
We have strict selection criteria: As part of the diligence process, iSelect’s Selection Committees dig into the fundamentals underlying each company: (1) Is the venture commercially ready for business? (2) Does the venture have the ability to create the barriers of entry necessary for a sustainable competitive advantage? (3) Is the management team in place capable of growing the business responsibly? (4) Has the company taken the appropriate steps to identify and address the risks of the venture to the extent possible for the relevant stage of the company. Companies that fall short on any of these criteria are not accepted to the iSelect platform.
Investors can monitor the progress of their portfolio: Our investors have access to all of this research as well, in the form of a summarized and packaged diligence file that is made available to investors and their financial advisors for each venture investment in the iSelect portfolio. Post-investment, companies provide quarterly reports so that investors can monitor the progress of their portfolio, all in an effort to help accredited investors to more easily evaluate, understand, and manage their personalized series of early-stage venture securities.
iSelect for entrepreneurs
iSelect identifies and invests in promising early-stage, private companies with more than just an idea. Our companies have already raised at least $250,000 through the “friends and family” round or received significant non-dilutive financing through grants or other sources. The entrepreneurs we work with are moving beyond concept to commercialization, but require more capital for further development. iSelect thinks of capital as more than just money. While we do provide financial capital, we work with our portfolio companies to also provide them with access to talent and customers.
iSelect for family office 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.
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.
Invest in multiple companies over multiple years: 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.
Dealflow / 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.
Investor-friendly terms: 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.
iSelect for financial advisors
Regulations, uncertain markets, monetary policy, and a thousand other factors are making it ever harder for financial advisors to offer their clients reliable investment strategies to meet their retirement goals. Retirees are watching retirement savings dwindle. Millennials don’t believe the S&P 500 is reliable. Few people trust Social Security to provide meaningful retirement benefits. It has become difficult for financial advisors to provide clients with solutions that offer real long-term returns.
Alternative investments: Many accredited investors and their advisors who are seeking consistent, risk-adjusted returns that are uncorrelated to the market are looking to alternative investments. This category of assets grew at an 11% CAGR over the last decade. Indeed, a survey found 43% of financial advisors expect to increase client allocations to alternatives within the next 12 months, and 78% agree or strongly agree that alternatives are a critical component of overall asset allocation. Alternatives are expected to account for up to 50% of net new revenues in U.S. retail asset management by 2020.