Venture capital (VC) has become an increasingly important asset class for institutional investors such as endowments, pension funds, insurance companies, and sovereign wealth funds, as well as for wealthy individuals. A large amount of money is involved: U.S. VC-backed companies raised nearly $300 billion in 2021. Moreover, there is a great deal of hype related to the potential benefits of VC. Everyone is aware of examples of phenomenally successful VC investments, including in Amazon, Facebook, and Tesla. And a quick Google search reveals many sources touting VC returns of 15 to 30 percent (and sometimes much higher).
The appeal of … Read more