From the 1960s through the 1990s, venture capital was an excellent way to pursue the following 2 interests:
1. Finding ways to support technological development as it is the fundamental driver of growth in the industrialized world.
2. Earning outstanding returns for investors.
However, from 1999 through to the present, the venture capital industry has posted negative mean and median returns, with only a handful of funds doing well.
What is our Secret Sauce ?
We invest mainly in Start-Up’s commercializing university based IP as this should decrease an investor’s risk exposure. This is due to the little known fact that 8% of all Start-Ups commercializing university intellectual property “go public” through the IPO process in comparison to a "going public rate" of only 0.07 % for other U.S. enterprises.
This gives Start-Ups commercializing university intellectual property a 114x advantage over all other US Start-Ups and why we think we can get above average investment returns by backing these kinds of Start-Ups.
68% of the Start-Ups commercializing university IP formed between 1980 (when the Bayh-Dole Act was passed) and the year 2000, still remained in business in 2001. This is in comparison to non-university based startups who experienced a 90% failure rate during that same time period. We anticipate that our Start-Ups will remain in business longer than the average and so can benefit our local Davis community over the long term.
Why are Start-Up’s commercializing university based intellectual property potentially important
to all citizens?
All of society should be able to benefit from the massive investment we have all made in the US university research system ... plus it has now become very difficult to make good returns in the retail stock market for the small, retail investor because almost all the returns are now made in the private equity market and not the public markets.
Source - Andreessen Horowitz
Some of the original technology giants like Microsoft generated excellent returns for the public market investor, but this is no longer the case . For example, for Facebook to match Microsoft’s public market returns, Facebook would need to be worth $45 trillion...
That's nearly 3 times bigger than the entire GDP of the US !!!!!
This means the public market investor can’t make this value back by just waiting…
Source - Andreessen Horowitz
So why do I not try my hand at angel investing to get back into the value again?
Unfortunately, to participate in the US Start-Up funding space, you need to be an "Accredited Investor". This means you have to have a net worth of more that $1million US dollars or an annual income of more than $200,000 for the last 2 years.
Why Accredited Investors Only?
That is a great question???
These regulations were designed to protect the small investor, but unfortunately have had unintended consequences.
Limiting Start-Up investing to accredited investors allows approximately 10% of the U.S. population participate as only 12.5 million households qualify as accredited investors under current standards, out of the total pool of approx. 110 million total US households.
These regulations have resulted in angel investing involving less than 1% of the US population in 2014 even though these investments help generate approximately 10% of the jobs in the US economy 2014.
This situation can only help accentuate the growing wealth divide in the US...
JOBS Act 2012
There is hope and change underway...
As of May 16th 2016, the JOBS Act of 2012 allows anyone with as little as $100 to now invest in a Start-Up within these investment limits, no matter their financial position...
Imagine the potential when we involve all of our citizens in the Start-Up investment process through crowd funding!
US angel investing statistics for 2014 *
316,000 angels invested $24.1 billion into 73,400 ventures,
1 in 5 deals pitched were funded
Average deal size was $325,000
Average equity granted 12%
An average of 4 jobs are created from each investment
*Jeffrey E. Sohl - Professor of Entrepreneurship and Decision Science Director, Center for Venture Research at the University of New Hampshire
Jeffrey Sohl, “The Angel Investor Market in 2014: A Market Correction
in Deal Size”, Center for Venture Research, May 14, 2015
There is no need to just imagine anymore, you too can fund the next great Start-Up by clicking this button and joining the Davis Funding Club...