Dreaming of a Prince
“Dreaming of a Prince” – a cartoon that illustrates why hedge funds are moving into venture.
In 2021, some of the most active firms investing in early-stage startups were hedge funds (e.g. D1 Capital Partners, Tiger Global), which historically have invested in more liquid assets.
For example, D1 decided to allocate 35% (or $11 billion) of their fund to private investments.
Hedge funds realized that they could use their large capital bases to take successful startups from their $100M stage at IPO through to multi-billion publicly traded company that dominates its sector (e.g. Warby Parker, Cazoo).
As a result, traditional venture firms are being squeezed down to early stage investing so that they can secure pro rata rights for later stage investment rounds in the most attractive startups.
