SharesPost 100 Fund (PRIVX)
By Adam Sharp
Twenty-five years ago, the fastest-growing companies in the world were publicly traded on stock exchanges. Anyone could buy them – even when the companies were still small and growing quickly.
Microsoft went public at around a $500 million valuation. Amazon was valued at around $450 million when it went public. And Apple’s IPO had about a $1 billion valuation.
Each has risen at least 100X since its IPO.
Today, things are completely different. Hot companies stay private as long as possible. Most investors miss out on the majority of gains from these “hypergrowth” companies.
For example, Uber is valued at $65 billion today. Airbnb is valued at roughly $35 billion. Palantir has been valued as high as $20 billion.
All of these hot companies remain private. We don’t know if or when they will IPO. Only venture capitalists and other private investors have made money on these companies so far. It’s a tragedy, because 99% of investors lose out on the opportunity to invest in these high-flying firms during their peak growth years.
Introducing the SharesPost 100 Fund
The SharesPost 100 Fund (ticker: PRIVX) is a mutual fund that offers all investors the chance to invest in high-growth private companies.
When you buy the SharesPost 100 Fund, you are acquiring an interest in some of the fastest-growing companies in the U.S., including…
- Lyft – North America’s second-largest ride-sharing company (behind Uber)
- Uber – North America’s largest ride-sharing company
- Palantir – Large-scale data analysis and organization
- Sofi – The largest provider of student loan refinancing in U.S.; also branching out to other financial services
- Dataminr – Transforms data from Twitter and other sites into financial data points, which it sells to hedge funds and others
- Optimizely – An extremely popular suite of marketing tools used by millions
- And many more.
(See the full list of companies here.)
These are some of the hottest secondary market shares in the world. There is an active secondary market in these companies’ shares because a lot of early investors or employees want to partially cash out. And groups like SharesPost acquire the shares.
The fund is considered to be “non-diversified” because a large percentage of its net asset value (NAV) can be concentrated in a few equity positions. This is how startup investing works. One company usually makes up the bulk of the returns. If you have a diverse group of private, fast-growing tech companies, like this fund does, you get a few that break out and become incredibly large companies. These drive the fund’s performance.
DocuSign was a leading company within the fund until its recent IPO. The fund will take a nice profit on its stake in DocuSign. And it has many other stars, a few of which may be breaking out soon.
Lyft, for example, is growing quickly. In the fourth quarter of last year, Lyft grew revenue 2.75X faster than Uber, according to CNET. And it’s looking into self-driving taxis. The company is still losing money, but investors are lining up to support the hypergrowth. Lyft’s valuation reportedly increased to $15 billion recently, but it is still significantly smaller than Uber at roughly $65 billion.
Another noteworthy company in the fund is Circle. Circle is backed by Goldman Sachs, which invested heavily in Circle’s last funding round. Circle is an up-and-coming financial services firm with a heavy focus on cryptocurrency. Circle recently purchased Poloniex, one of the largest U.S.-based crypto exchanges. This company sees itself playing a big part in the future of money, including the tokenization of securities and other assets. It wants to be a leader in that space.
So on top of the other impressive portfolio companies, PRIVX also has a stake in one of the hottest private crypto companies.
Read the prospectus for the SharesPost 100 Fund here (PDF). It contains important information on the fund. It’s short and informative.
IMPORTANT NOTE: There is a 5.75% sales load on this fund. If you put in $10,000, the fund takes 5.75% off the top, so your total investment would be $9,425. This is to cover the fund’s administrative costs, which are significant. (The fund acquires illiquid shares of private companies, which is no small task.)
Still, this is a high sales load. If you don’t plan to hold the fund for years, it is NOT worth investing. Only buy this fund if you plan to hold it for the long run.
There is also a 1.90% advisory fee annually. In the venture capital world, most managers charge 2% per year, plus 20% to 25% of profits.
The minimum investment is $2,500.
This fund invests in private shares that are not as liquid as stocks. It is a “closed-end fund.” The shares it owns are not frequently traded, because transfer is a legal process that requires a bunch of paperwork. This could add additional risk compared to investing in publicly traded stocks, which can be liquidated instantly. Liquidity could become a problem in a credit crisis, and the fund could have to sell at a higher loss if customers redeem their fund shares en masse.
I only recommend investing if you plan to hold this for years.