If you were one of the many investors in Snap, Inc. (SNAP) upon its recent IPO at $24, you enjoyed some impressive early gains (at least until the stock dropped 12.26% on Monday). However, the early investors who were able to get in at the $17 offer price prior to the IPO are still sitting comfortably in the black, even after Monday’s stock plunge.
Of course, most investors aren’t able to invest prior to a company’s IPO (that’s the nature of a public offering, after all), and with a growing number of disruptive companies delaying their IPOs or opting to remain private, that leaves Main Street clearly on the outside looking in at some of the most lucrative opportunities. It’s a problem with significant and damaging long-term effects… and one that the team at GSV Capital is working to change.
“Our business model is all about how we identify and access the fastest-growing, top venture-backed companies in the world,” says Michael Moe, Chairman and CEO of GSV Capital (GSVC). “We operate out of Silicon Valley, where a lot of these companies are headquartered. So, we use our network and our experience to find ways to get involved with these companies.”
The companies GSV Capital invests in are certainly varied, but many do share a common thread, as tech-centric companies with an unusual probability for major sector disruption. “Fifty-five percent of the portfolio is in our top 10 positions,” says Moe. “One of our largest positions is Palantir, which is a software company focused on security and big data. Spotify, Dropbox, Lyft, Coursera and Snapchat are all important positions of ours.”
How Does GSV Capital Help Expose Clients to Promising Private Companies?
“Fundamentally, what’s changed over the past 15 years is, there’s been an 80% reduction in the number of IPOs – which is secular, it’s not cyclical, so that change is going to be permanent,” Moe says. “And so, the fastest-growing, most dynamic companies today are all private. Twenty years ago, if you were an investor looking for growth companies, you could hang around the IPO coop, and hundreds of companies went public every year. That’s just not the case anymore. So if you really want to be exposed to growth, the best way to do it is to invest in private companies, and GSV Capital provides a publicly traded liquid access vehicle to the transformative companies that are changing the world.”
How Did GSV Capital Come to Be?
“I was a research analyst for many years,” says Moe. “Then, in 2001, I started an investment bank, ThinkEquity Partners. The business model was basically to partner with these young emerging businesses early in their lifecycle. What changed, when the dot com bubble burst, was that the structural issues that I alluded to earlier resulted in the IPO world just basically being turned on its head. Basically, the experience I had gave me exposure to the fact that IPOs were not going to be the way, if you’re a growth investor, to find the best companies to invest in. So, it really started looking at the private company world for that opportunity.”
Along with his work as CEO of GSV Capital, Moe has been educating the public on recent trends in tech and investing as author of The Global Silicon Valley Handbook. “GSV stands for ‘Global Silicon Valley,’ and so, while we’re based in Silicon Valley, what we’ve seen as a megatrend is the mindset of entrepreneurship and innovation that’s made Silicon Valley such a remarkable place, is going global, and it’s going viral. So, that’s what we’ve published in our book,” Moe explains. “It looks at this landscape around the world – as I like to say, from Austin to Boston, from Chicago to San Paulo. From Shanghai to Mumbai to Dubai. That’s the Global Silicon Valley. So we’re interested in connecting this global network around innovation and entrepreneurship, and how to know where to find the best companies, who the best investors are. But also, to be a little tongue-in-cheek; to have fun with it as well.”
So where does Moe expect the next major disruption to come from? “First of all, the megatrend of the internet,” Moe says. “Everybody seems to think that’s over, but really, we’re talking about a 200-year cycle. I mean, it’s disrupting everything, and there’s disproportionate gain to the leader in a category – that’s the internet economics.”
“I think some areas that are coming into their own are Blockchain. Everybody’s familiar with Bitcoin, but Bitcoin is just the beginning, really, of the disruption you’re going to see in every industry, I believe, created by the Blockchain. You look at healthcare, and basically the idea that the digital doctors, and the ability to get more accurate, on the fly, inexpensive medical advice and treatment is something that is going to be very real, and how that affects traditional doctors and hospitals and drug companies. I think it’s going to be fascinating, with huge opportunities being created.”
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