Good post Sig, interesting to say the least. Looked up some information while reading this thread and while some presentations boast about yearly 10%+ return for PE funds another study claimed most investors don't even get back the whole capital period, never mind any profit, and that's after a long lock up period - 12 years and plus from HSBC website, not sure what is the standard. Newwurld, pm sent.
It's pretty important to see the probability distribution in this industry. You may read a report that says on aggregate Venture funds get a X% rate of return. If you look at the details, you'll see that Kleiner, DFJ, Sequoia, Accel, and a couple others are responsible for the majority of those returns and everyone else looks pretty bad if you pull those top performers out. They perform so well because they get the deal flow, as I mentioned in my earlier reply, and there is a significant virtuous circle in that part of this industry. Those top funds generally only allow existing LPs to invest in new funds, and have a pretty long wait-list if anyone doesn't take their pro-rata quota, which means a random individual investor doesn't have a chance in heck of investing in these funds. Again adverse selection is very strong here, just like it is for the funds choosing companies to invest in. If you as a small individual investor are able to invest as an LP it means you're investing in a fund that probability says will significantly underperform. It's also very important to distinguish what stage of VC a firm is investing in, as sle alluded to. There's a huge difference in a fund that invests most of their money in C and D rounds vs one that invests most of their money in seed and A rounds, so much so that they're barely in the same business. If you open it up to PE in general, VC accounts for only a small percentage of the entire PE industry and again is so different from the rest of PE that it's really a different industry.
These Are the 50 Most Promising Startups You’ve Never Heard Of https://www.bloomberg.com/graphics/2017-fifty-best-startups/
Here is an example of investing in seed round for Blue Bottle Coffee Company https://www.crunchbase.com/organization/blue-bottle-coffee#/entity
for purchase of pre-IPO company shares check out http://sharespost.com/buying-or-selling-private-company-shares/?utm_source=google&utm_medium=cpc&utm_term=+private +company +stock&utm_campaign=Gen Private&utm_content=private company stock&gclid=CLqHqo_qw9ICFRSFfgodSv8MDA https://equidateinc.com/
I don't see a seed round in there, but it is illuminating who the individual investors are. In this case I see Tony Hawk (most famous skateboarder in the world), for example. So again, he brings way more than his money to the table for this particular company, and demonstrates that a random medium net worth individual isn't going to get in on this kind of investment unless they have a personal connection to the team.