Why don’t private investors have greater access to venture capital funds?
It’s a question which led Jonny Blausten to found Sprout after he became frustrated when looking to add lucrative opportunities to his investment portfolio.
Blausten began his career as a strategy consultant, spending seven years working on mergers & acquisitions across deals including General Atlantic’s unicorn-making investment in Gymshark in August 2020.
While working on deals across early stage, growth and private equity, he witnessed the investment opportunities on offer to leading investment funds, and realised he wanted to start investing directly in the funds themselves. Private markets – and venture capital in particular – have outperformed public markets every year since 2000.
However he repeatedly faced the issue that he has now dedicated his career to eradicate: the best funds required investors to be exceedingly well-connected, or to invest minimum amounts in excess of £1 million or more.
“Most private individuals in the UK are still underexposed to venture capital, often with no private market investments at all,” he tells TechBlast. “We’ve witnessed first-hand the appetite for long-term, higher-upside investment classes like VC.
“Similarly, we’ve experienced – and been limited by – extremely high minimum investments and a requirement to have extensive industry knowledge. It’s now time to level the playing field, giving qualified investors access to this top-performing asset class.”
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Growing community
So far it has placed investments into four leading venture capital funds, with “a host of top funds lined up for 2023”. It has grown a community of more than 1,000 private investors.
“There is a growing appetite for private investors to better diversify their portfolios,” says Blausten. “Traditional investments including ISAs and pensions are heavily linked to the stock market. True diversification therefore comes from expanding portfolios to include private market asset classes.
“Whether investing £5,000 or £500,000, we’ve built the platform for private investors who are motivated to invest in the same way as the most sophisticated, well-connected investors.”
Through the platform, investors are given access to expert fund managers, opportunities and returns previously inaccessible on their own.
“It’s still early for VC in Europe, but the market is developing quickly. Naturally, Europe is still several years behind the US, but we’re seeing growing investor appetite and a host of new funds supporting a new wave of European innovation,” continues Blausten.
Education
Sprout produces weekly content and events aimed at educating its community and connecting them with other like-minded individuals.
“For us, the biggest challenge revolves around education,” the CEO explains. “People need to understand how venture capital works, how it sits alongside other asset classes in their portfolio, and how to choose between different opportunities. They also need to be comfortable with the liquidity profile of venture capital.
“Whilst VC has outperformed most other asset classes, investors need to be comfortable knowing that their money is tied up for five to ten years when they invest in VC funds. That’s part of the trade-off.”
Startup tip
Asked for a tip for fellow startup entrepreneurs, he offers: “First, identify one overarching goal and pursue it relentlessly. You will have a million decisions to make every day, so be open to new ideas and possibilities, but make sure you’re always moving towards the main goal, and don’t follow roads that take you too far away from your target.
“Secondly, surround yourself with good people. You can’t do everything yourself, so it’s important to recognise when it’s time to bring other people into the room.
“Finally, not all advice is equal. You’ll receive plenty of feedback from people you meet – friends, investors, and customers to name a few. Listen and absorb it all, but do not overlook the importance of knowing who to listen to most.”