Topic
Startup investing
How early-stage equity investing actually works, the two main paths LPs use, and why most outcomes take years.
What this means
Startup investing means putting capital into early-stage private companies — usually pre-seed, seed, or Series A — in exchange for equity or a convertible instrument. Returns are illiquid, concentrated, and dependent on a small number of outsized winners.
Why it matters
Most startup outcomes are zero or near-zero. A small minority compound into the returns that define a portfolio. That math drives nearly every structural decision in venture: portfolio construction, follow-on reserves, manager selection, and time horizon.
Common questions
- Direct or through a fund? — Direct investing requires deal flow, diligence, and time. A venture fund pools capital, builds a diversified portfolio, and outsources those jobs to the GP.
- How long is the hold? — Plan for 7–12+ years between commitment and meaningful liquidity.
- Who is it appropriate for? — Investors who can tolerate illiquidity, total loss of any single position, and concentration risk inside a long-dated portfolio.
What to watch for
- Promises of guaranteed returns, fixed timelines, or risk-free access.
- Marketing that treats venture like a yield product.
- Anyone asking for capital before private materials and qualification.