AngelList just announced a new registered, non-traded fund, USVC, to enable retail participation in the private securities sector. Fundrise, an investment platform that originally targeted private real estate investments rather than early- or later-stage private investing, recently launched a publicly traded fund, Fundrise Growth Tech Fund (VCX). These two funds, along with other options for smaller investors, are good for retail investors because they provide a path to participate in private securities, typically the realm of VCs and other professional investors.
Today, much of the capital gains from successful private firms are captured before these firms go public (if they ever do), so allowing retail participation is important for providing access to this asset class.
While USVC and VCX overlap in some of their holdings, there are differences between the two vehicles that investors should recognize.
VCX is publicly listed on an exchange, thus it provides liquidity for investors who need it. It is a tradable fund.
USVC, on the other hand, provides limited liquidity, meaning investors should be patient, as there is currently a limited path to exit their holdings.
If you value liquidity, you should take this fact into consideration.
At the same time, USVC is valued differently from VCX. USVC has a valuation policy that provides a Net Asset Value using audited financials or recent funding rounds.
VCX is market-driven, determined by buyers and sellers on an exchange. It is currently trading at a significant premium to its individual holdings. While NAV is between $18 and $20 per share, VCX is currently trading around $85 per share, or over 4X NAV.
Efficient App founder Alex Bass recently discussed this in a thread on X, stating VCX is why USVC needs to exist.
VCX has traded between $31.21 and $575 a share. This dramatic range is probably due to a small float and a liquidity premium, but the premiums remain. Of course, the premium may diminish over time, but for investors, it is important to understand the similarities and differences between the two vehicles.
As the current administration and leadership at the SEC are supportive of expanding access to private markets for smaller investors, competition should push prices lower. This is a good thing, but it will take some time. And if Congress approves a new definition of an Accredited Investor, where acumen and sophistication count, this will help democratize further access to private markets.
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