How Allocate is making venture capital a mainstay in investors' portfolios
Broadhaven Ventures' investment in Allocate
“The hottest thing in finance is not passive funds, crypto, or even commodities. It is private capital.” (“The Private Markets Supercycle,” FT, April 18 2022).
We are witnessing a Cambrian explosion of interest and asset flows into private markets.
Business is booming.
Private capital now accounts for over $10T of AUM, which pales in comparison to Goldman Sachs’ prediction of $30T by 2026.
There is significant interest in alternative investment funds, particularly private equity and venture capital funds, from a new cadre of investors. But until recently, investors’ exposure to top PE and VC funds was a case study in the haves and have nots.
Many of the world’s most sophisticated investors, large pensions and endowments like Yale and Harvard, have 20-30% of their asset allocation dedicated to PE and VC funds. And for good reason. It is a significant driver of their returns. Many other investors, however, historically have not.
The rise of the retail investor
We are witnessing a rise of the retail investor. This trend is largely enabled by market structure innovation from platforms that are making alts go mainstream and downstream.
Access to top-tier VC funds should not be limited to the select few institutional and high net worth investors who can meet the high minimums (often $10-20M commitments).
Technology and better infrastructure solutions had to be built to change this. I was lucky enough to be part of building the core infrastructure early on in the alts space with the platform, iCapital, that set the retailization of alts in motion for investors to access top-tier private equity and hedge funds.
Building a great alts platform
What does it take to create a great alts investment platform?
The right balance of high-quality supply side assets (i.e., top-tier, hard to access funds, in this case VC funds) and advantaged distribution networks (i.e. RIA platforms, private bank relationships, family office / HNW relationships) to efficiently and effectively enable demand to meet supply.
Underpinning a well-functioning marketplace dynamic must be a superior technology architecture and investment infrastructure that enables a better experience for both funds and investors to evaluate, access, and manage investments and the administrative burden into funds at lower minimums.
Allocate has this in spades. They are bringing together the best of Silicon Valley technology with the understanding and network from traditional finance and banking many of the world’s leading VC funds.
Samir and Hana spent the better part of the past decade building the world’s best VC / PE fund banking business at First Republic. At First Republic, they built the foundations of what would become Allocate. They developed an exceptional network of VC funds and LPs. They built trusted relationships with both sides of the GP and LP marketplace. They built the financial products to serve GPs with products that would help them grow their business, and over their careers lent over $12B to businesses in the private markets.
When we met Samir and Hana before they even had a product built, it quickly became clear that they had all the ingredients and the vision to build a leading alts investment platform, so we knew we had to be involved from the start to help them build out the pieces like we did at iCapital.
We believe that alts are going mainstream — and we’ve invested in many of the leading platforms in this space
We are big believers in the thesis that alts are going mainstream. It’s why we’ve invested early in many of the foundational platforms in this space from iCapital to Republic to Carta to Forge to Alt.
And Allocate is no exception. It will be platforms like Allocate that enable VC fund managers to expand their businesses by helping them grow the number of investors they can work with an efficient, cost-effective manner and allow more investors to participate in an asset class that is no longer alternative but a mainstay in all investors’ portfolios.