Startups are risky because startups can fail. However, startups have the potential to bring in massive gains. Gains you do not see on the stock market. Not to mention, by the time you invest in a public company, who knows how close it is to its decline. We find leading growth companies that prove they have potential to IPO — that is why we are VC Fund. We believe that this thesis offers the best return on capital.
An example of how pre-IPO returns compare with the average stock market return: since the start of the stock market, the market has historically returned an average of 10% annually before inflation. For example, Snapchat (NYSE: SNAP), went public in 2017. Let's say you invested $100 in the early days, before it went public. Your $100 would have turned into $22,000. That's a 21,000% gain! Facebook and Twitter investors crush the Snapchat figures. In order to emphasize the investment thesis of pre-IPO investments, Palantir had a direct listing on September 30, 2020, which closed trading at approximately $10.00 per share. Investors from our Fund had the opportunity to purchase shares below the IPO share price.
Snapchat and other technology stocks have great potential in the stock market. Yet, you can see that early investors make some of the biggest gains before they go public. You now have the opportunity to get in on the action as well.
Another benefit of pre-IPOs is avoiding stock market volatility. Depending on the company, pre-IPO investing is not affected as much by events such as the 2008 financial crisis or the 2020 COVID-19 pandemic. On the other hand, all investing carries risk, and comprehensive due diligence is essential.
Like we said, pre-IPO investing comes with risk. Sometimes it is a lot of risk. Startup companies are not guaranteed to succeed. So when an investment is being evaluated, the next question should be, "risk vs. return vs. liquidity?" VC Fund appreciates this dilemma and works to resolve it. A good investment should balance product, industry, and returns with time. For example, if you invest with the world-leading company that manufactures 8-track music equipment and plans to IPO in 12 months, what do you really have? You do have the leading business in a dying industry, but a near-term liquidity date. The inverse, you can invest in a bio-metric eye-contact company which is years in front of its competition, but also years away from consumer adoption, FDA approval, and a liquidity event. We believe VC Fund is the best approach.
Investment opportunities posted on this website are "private placements" of securities that are not publicly traded, are subject to holding period requirements, and are intended for investors who do not need a liquid investment. Investing in private companies may be considered highly speculative and involves a high degree of risk, including the risk of substantial loss of investment. Investors must be able to afford the loss of their entire investment. See our Risk Factors for a more detailed explanation of the risks involved by investing through VC Fund’s platform.