Financial Samurai - Forums

General Investing => Alternative Investing And Derivatives => Topic started by: LongTimeFirstTime on December 09, 2019, 12:22:00 PM

Title: Venture Debt
Post by: LongTimeFirstTime on December 09, 2019, 12:22:00 PM
Sam -

You have mentioned a few times that you are invested in a venture debt fund. I wanted to ask about your decision to invest in this asset class.

I tend to think about venture debt as "debt-like returns with equity-like risk". Is there a reason why you decided to allocate to venture debt instead of venture (equity) or middle market buyout (PE) strategies? These strategies typically have higher returns than debt and the returns are taxed as capital gains rather than income.

I'm aware that access to venture and PE is highly limited for non-institutional investors which might play a role in the decision. It just seems that you would want to get paid for the illiquidity and risk of the asset class.

Thanks for your help!
Title: Re: Venture Debt
Post by: Sam on December 10, 2019, 08:51:28 AM
The returns are much higher than normal debt instruments. We're talking mid teens where are you provide that to a highly funded start up an exit within three years. The risk is nowhere near the same as venture-capital equity.

A firm like a Triple Point Capital has provided pretty solid risk-adjusted returns.

It's also a way for me to diversify my investments. I like to have 10% to 20% of my investments in alternative investments. I also invested in Kleiner Perkins latest venture capital fund as well. It's cool to be in the mix.