This chart shows the future of venture capital

This chart shows the future of venture capital

ON AUGUST 28, 2013


The dramatic drop in the cost of creating a company over the last decade ($2 million in the late ’90s to maybe $5,000 today) has had an obvious effect on the venture capital world. Serious venture investment is not required in the earliest stages of a company’s life, so angel investors have been getting the best seed deals. That spawned “super angels” and their subsequent micro-VC funds, which in turn evolved into crowdfunding platforms like AngelList.Meanwhile, old school venture firms with their ten-year investment vehicles and mostly mediocre returns are realizing that money is a commodity. It echoes statements made by Fred Wilson of Union Square Ventures, who predicts that venture capital as we know it won’t be around in ten years.

Good founders can get capital anywhere. So they’re choosing the firms that will help them the most. That’s why some VC firms, like Andreessen Horowitz, have adopted agency-like models, where they provide in-house PR, marketing and recruiting. Others, like First Round Capital, are building acommunity-driven platform that allows its portfolio companies to share knowledge and help each other.

VCs are even becoming publishers — First Round recently launched its “First Round Review.” Andreessen Horowitz hired Wired editor Michael Copeland to produce content for its site. Battery Ventures hired former Wall Street Journal reporter Rebecca Buckman for a similar role.

As Alex Bangash put it, “VCs are becoming platforms and platforms are becoming VCs.”

He would know — Bangash has acted as a fixer of sorts for institutional investors and venture firms over the last decade. He’s also built his own platform, a site called Trusted Insight. (Since Bangash made the chart, he’s obviously included his own platform on it, to the far right.)

The site might be the largest social network for limited partners, i.e., the pension funds, universities, family offices and institutions that invest in venture, private equity, real estate and hedge funds. Today he publicly unveiled it for the first time.

Trusted Insight has eight employees and has raised a small amount of funding from Data Collective, Founders Fund, RRE Ventures, Morado Ventures, Real Ventures, 500 Startups, Alexis Ohanian, Garry Tan, Eric Chen, Lauder Partners, Jon Moulton, and Marleen Groen.

The site has 58,000 registered users representing trillions of investment dollars, which is an impressive number when you consider how small the global pool of alternative asset limited partners is. Bangash estimates that a third of the world’s alternative asset investment managers are on the site.

Couple that with how insanely private they are. As a reporter, I know all too well how hard it is to track these people down. They make themselves difficult to find on purpose, mostly because they don’t need to promote themselves, and they don’t want to be harassed by fund managers begging for capital. “LPs want a new deal like they want a hole in their head,” Bangash says.

Limited partners are like the Field of Dreams of the investment world. I can remember the private equity conferences we threw at Buyouts magazine. As long as we got the big-name LPs to sign on, we knew the fund managers, service providers and various other industry hangers-on would be there. After all, the LPs are the ones holding the purse strings.

Through Bangash’s connections and word-of-mouth, a large population of them have signed up for his service. Around 60 percent of them return each month.

There they can network with contacts, get a serving of personalized news tailored to their interests and activity on the site, and see job postings and events that are relevant to them. There is also vouching, and users keep a much smaller circle of connections than on a typical social network.

Bangash is not planning to pimp them out to fund managers desperate for investment dollars, per se.  ”It’s built for them, to make them comfortable,” he says. He’s monetizing with a LinkedIn model. Users such as GPs raising funds, or service providers like lawyers, can pay a subscription fee for access to premium features, which includes the ability to interact with LPs. It’s akin to the way recruiters (and others) can pay LinkedIn to get messaging access to anyone they want. Since rolling out the paid tools six weeks ago, Bangash says he’s been surprised that more LPs than anyone have signed up to pay.

Bangash’s goal is to have investment professionals in the alternative asset sector use his site to do their jobs every day. As VC evolves from venture capital to venture platform, he’ll be there waiting.

About bambooinnovator
Kee Koon Boon (“KB”) is the co-founder and director of HERO Investment Management which provides specialized fund management and investment advisory services to the ARCHEA Asia HERO Innovators Fund (, the only Asian SMID-cap tech-focused fund in the industry. KB is an internationally featured investor rooted in the principles of value investing for over a decade as a fund manager and analyst in the Asian capital markets who started his career at a boutique hedge fund in Singapore where he was with the firm since 2002 and was also part of the core investment committee in significantly outperforming the index in the 10-year-plus-old flagship Asian fund. He was also the portfolio manager for Asia-Pacific equities at Korea’s largest mutual fund company. Prior to setting up the H.E.R.O. Innovators Fund, KB was the Chief Investment Officer & CEO of a Singapore Registered Fund Management Company (RFMC) where he is responsible for listed Asian equity investments. KB had taught accounting at the Singapore Management University (SMU) as a faculty member and also pioneered the 15-week course on Accounting Fraud in Asia as an official module at SMU. KB remains grateful and honored to be invited by Singapore’s financial regulator Monetary Authority of Singapore (MAS) to present to their top management team about implementing a world’s first fact-based forward-looking fraud detection framework to bring about benefits for the capital markets in Singapore and for the public and investment community. KB also served the community in sharing his insights in writing articles about value investing and corporate governance in the media that include Business Times, Straits Times, Jakarta Post, Manual of Ideas, Investopedia, TedXWallStreet. He had also presented in top investment, banking and finance conferences in America, Italy, Sydney, Cape Town, HK, China. He has trained CEOs, entrepreneurs, CFOs, management executives in business strategy & business model innovation in Singapore, HK and China.

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