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July 30, 2008 3:46 PM

How Can I Invest In A Venture Capital Firm?

Q: Your site talks a lot about VCs investing into companies but I can't find any information online (even on the VCs websites) about how VCs solicit investors to their funds.

I want to invest with a VC but I don't know what is the minimum VCs accept. Who in the firm should I contact to invest? What kind of terms should I expect? What kind of returns does an investor normally expect? How soon would I get my money back with the profit? Would I be in a position to make demands and say "I want a fourth of my investments to go to XYZ company that is looking for VC funding"? etc.

A:  (Jason) Most venture firms do not take individuals as investors unless they have a pre-existing relationship with them.  Most VC investors are institutions, endowments, pension funds and other corporate entities that professionally and regularly invest in VC funds  As an individual, your best way of investing is either through high net worth family office organizations or through your financial broker, if they participate in these types of offerings.  Because of this, and because of securities laws that I won't bore you with, you'll never find information on VC websites on how to invest. 

As for your ability to control terms or designate investment particulars, this probably won't happen.  The large institutions that invest in funds drive terms, not individuals, so if you do decide to invest, you'll piggyback off the terms the VC fund and it's largest investors negotiate. 

Posted in: Fundraising | Posted by: Jason Mendelson
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