We’re Challenging the Financial Services Industry to Think About Venture Investing

I recently participated in a panel discussion at Worth magazine’s 2017 Power 100 Summit in Greenwich, Conn. titled “The New Landscape of Power,” the event was a deep dive look from the investor’s point of view at everything that has happened in the last year — from the rise of populist politics in the U.S. and Europe, to Blockchain, climate change and more.

My portion of the event was dedicated to “Investing in the Age of Trump”. While there was plenty of angst about a “market top, and how to navigate in an era of uncertain policy direction, my message for them was simple: think about venture.

Venture capital investing remains one of the highest yielding investment classes available today and a large part of that outperformance is based on the illiquidity premium, which is the higher yield that investors can find by investing in products that are not easily traded. Venture, where the typical investment lasts at least five years, is a textbook example of the illiquidity premium in action, and presents upside that is uncorrelated to the ebbs and flows of the larger stock and bond markets.

For these uncertain times, it is an attractive option for many investors, and a discussion worth having for financial advisors.

For the advisors I met at the Worth summit, I had three pieces of advice:

Get creative: Financial advisors need to understand the value of the illiquidity premium and start allocating client funds beyond the core holdings of stocks, bonds, ETFs, etc. Clients are interested in alternative investments and are open to learning about the potential for products like venture, they just don’t know what they’re missing out on yet.

Find the right clients: Particularly for those clients with 10-20 years of runway left before retirement, a portion of their portfolio should be considered for alternative and illiquid investments. They have the time to see these types of investments through and are looking longer-term than those investors who are just a few years away from retirement.

Sell the message: Venture investing is about more than just numbers on a page. When a client invests in a venture capital fund, they are also supporting the growth of private smaller companies and our economy as a whole. They are supporting job growth, innovation, and the hopes and dreams of small business owners nationwide. This can be a powerful sales message, particularly for younger investors.

This market isn’t going to get any easier to predict, and there is a good chance the uncertainty we’re seeing now is going to get worse before it gets better. But that doesn’t mean investors should get out of the market altogether. In fact, this is an excellent opportunity to tap into the uncorrelated potential of venture investing.

Contact us to learn more.

Consideration

With 2021 well underway and with public markets still strong, we think it is an important time to highlight some of the key private market, venture investment themes that iSelect fund has identified for the year. We believe technologies transforming the Agriculture, Food and Wellness markets will flourish, with a focus on four areas: technologies that enable better food choices to drive better health outcomes, technologies that drive better, more profitable farm operations, technologies that drive the Consumerization of Healthcare, and biome-based treatment technologies. At iSelect, we invest for impact AND performance. We offer qualified investors access to emerging growth companies through our national venture capital strategy. Our unique structure allows our investors to continue to invest in these companies as they develop.

Timing

Why is now the right time for venture? The answer is that now is not explicitly the right time. Venture is something we need in our economy at all times. Now is not better than any other particular time. The question is, why ever stop? When we look at the challenges we’re facing in food and healthcare the reality is there is someone, somewhere who has an insight about how to build a product that will solve those problems. And if they put the right resources to it, they will succeed. As long as we need new technology to make life better or make our lives more enjoyable, we need venture capital to help fuel those entrepreneurs.

What is iSelect as a product?

iSelect is a very unique product, but when you break it into its parts it’s fairly easy to understand. On the front end we’re a traditional venture capital fund. We have a diligence process. We have an investment process. We have categories of industries where we have focus and real expertise, and we invest in companies in those areas that meet requirements for the fund. On the back end we’re unique in that we don’t raise a large amount of capital at one time and deploy it over the life of our fund. Each deal that we bring onto the fund, our investors have to prove and determine to invest in that deal. We have to constantly prove our diligence standards. It’s accessible, transparent and easy for investors to come in and see our comprehensive process.

What is the ideal iSelect company?

We are looking for founders that are passionate and we want the problem they’re trying to solve to be big, real, and painful. We want the solution to be revolutionary and we want our capital to be able to help them solve that problem. We want to know that they have customers involved and that the solution they’ve come up with actually meets those customers’ and market needs. And we want the team to be capital efficient with the money they’re spending.

What does the ideal iSelect company look like?

We’re looking for a company that has an opportunity to have a 10x return to our investment or greater in a period of three to seven years. What excites us at iSelect are companies that are solving big problems. We want companies that are going to be the Monsantos of the future. Not just in the size and the scope, but the impact they have on people’s lives. We want to create positive impacts on people’s lives, so we invest in areas like agricultural production and areas like producing healthy foods for our kids. They are problems that impact real people’s lives on a daily basis. That’s what we’re trying to do at iSelect. We’re trying to solve the big problems out there. Find ways to bring capital to the entrepreneurs who are the real heroes out there getting up every morning, beating away at these things that are problems that you and me and everyone else faces in their everyday lives.

What is iSelect?

iSelect is a venture capital firm. What that means is we look at hundreds and hundreds of different companies and we apply tough diligence standards to each of them, looking at whether the team has a good plan for growing the business, whether the team is qualified and credible, and more. We do that to resolve the few who provide the best opportunities for investors. And then iSelect takes that smaller set of investments and goes to investors who are interested in venture capital and provides a way for them to invest in these companies, either individually or all at once. We co-invest alongside other venture capitalists. We source transactions through to an exit where the company would become public or get bought. And we manage that whole investment process on behalf of our investors.