An Introduction to Allen Street Ventures

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  Speaker 1:
  Welcome everyone to today’s Allen Street presentation. Allen Street Venture is a fund for Penn State alumni and friends of the community. Glad you can join us today.

  Before we get started, this presentation is for informational purposes only and is not an offer to buy or sell securities, which are only made pursuant to the formal offering documents for the fund. Please review important disclosures in the materials provided for the webinar, which you can access at www.avfunds.com/disclosures.

  Please note you will be on mute for the entire presentation, and this webinar is recorded and will be shared after the event. We encourage you to submit questions throughout the webinar. We will try to answer your questions during the Q&A session—please enter your questions into the questions section of your GoToWebinar control panel and click submit.

  Next slide, please.

  First, a quick introduction. I am Managing Partner of Alumni Ventures. I’m based in Silicon Valley. I was an entrepreneur in the first part of my career. Later, I spent almost a decade in corporate ventures—initially with Cisco, leading software infrastructure investments, mergers, and acquisitions. I ran HP Venture for about four years and helped build several cross-border funds between Asia and the U.S., focusing on AI, SaaS, and infrastructure services.

  On the agenda today, we’ll share why someone would invest in venture capital, introduce Alumni Ventures, and explain how you can start your venture investment journey with us.

  Next slide, please.

  First of all, let’s talk about what venture capital is, as we get that question a lot. Venture capital is a form of investment in private companies where investors can capture the value created during the earliest phases of a company’s development before their public offerings.

  Technology and innovation companies typically require significant R&D funding before they can sell their products. Almost all well-known public companies today started as venture-backed companies. For example, Nvidia was invested in by Sequoia Capital and Sierra Ventures. Google was invested in by Kleiner Perkins and Sequoia. Apple was funded by Venrock, Sequoia, and Matrix.

  Venture capital is about creating value in a startup from its beginning, taking on additional risk when a company is small in order to achieve outsized returns.

  Allen Street Ventures is a venture fund and is part of Alumni Ventures. Alumni Ventures is America’s largest venture firm for individual investors. We have raised over $1 billion—currently $1.25 billion—in the last 10 years.

  As part of our portfolio, we invest into 20 to 30 venture-backed companies. We have 40 full-time venture investors to help construct a fully diversified investment portfolio. We support the Penn State community with our fellow programs and potential job opportunities. Our portfolio companies may also be Penn State alumni-founded, and we can help with connections, capital, and potential customers.

  Next slide.

   

  Let me start by talking about why most people choose to invest in venture capital, as that’s the biggest question on most people’s minds. For about 75–80% of our investors, this is their first exposure to venture capital.

  The majority of their net wealth is usually tied up in traditional assets such as stocks, bonds, and real estate. The main reason people choose to add some venture capital is that venture capital has consistently outperformed comparable public indexes.

  While there’s no guarantee because past performance is not predictive, the key thing to remember is that returns can be significant. These returns are also capital gains-taxed, making them tax-efficient due to the long holding period. You can also use retirement funds to invest in this asset class, which can be advantageous for timing and taxes.

  The trade-off is that your money is illiquid for an extended period. The life of our fund is 10 years—we’ll show more details in later slides. Startups we invest in take time to mature, so we typically tell investors not to expect many returns in the first five years. Most returns will come later in the fund cycle.

  The second reason people invest in venture capital is that it’s largely uncorrelated with public markets, helping balance portfolio construction.

  The third reason is that, over the last 20 years, private markets have developed significantly. Historically, startups went public much faster than today. For example, around 1999–2000, startups would IPO after about four years, with average valuations of $500 million.

  Now, with well-developed private markets, companies have enough capital to grow privately much longer, leading to higher IPO valuations.

  For individual investors, this means you often can’t invest in these companies until they’re already much more expensive. That’s why the Alumni Ventures model makes sense.

  Next slide.

   

  How do we get access to great investments?

  One reason is that we are a very large firm with a large investment team. With more than 40 people dedicated to finding top venture deals, we can access opportunities smaller investors cannot.

  Why would founders or top venture funds take our money versus others? Because we bring a large network of resources to help startups.

  On one side, we have over 600,000 community members from top universities that startups can tap into for talent, employee hiring, advisors, or board members.

  We also have more than 1,300 portfolio companies. We have a large CEO services team that connects startup CEOs with one another. Founders really value this because it helps build their ecosystems and even gain customers through these connections.

  We bring a tremendous network advantage when we invest.

  Why would other well-established VCs like us? Because we don’t lead rounds or compete with them for small allocations. We help founders and other VCs with our network—we win together. It’s a win-win for everyone.

  Next slide.

   

  As I mentioned, we’re growing fast. We are America’s largest venture firm for individual investors based on PitchBook data. We’re the #1 most active venture fund in the U.S. and #3 globally. We’ve raised over $1.3 billion since inception and have more than 1,300 portfolio companies.

  Next slide.

  This slide is similar to the last—it essentially shows how much we’ve grown in the last few years.

  Next slide.

  As mentioned earlier, the main reason people choose to add venture capital to their portfolio is its consistent outperformance compared to public indexes.

  Here’s a slide about Alumni Ventures’ performance. We use the Russell 2000 index instead of the S&P 500 because it’s a better comparison; the Russell 2000 consists mainly of smaller companies, which is more similar to venture-backed startups.

  Venture investments take time to mature. As shown here, the longer the timeframe, the better the potential performance.

  Next slide.

   

  We have a large investment team within Alumni Ventures because we want to see all the top deals in the market. Alumni Ventures typically does 150 to 250 deals yearly, so we must review a lot of startups.

  Here’s an illustration of our deal flow:

  To invest in an average of 20 to 25 deals monthly, we need to review over 500 deals per month. This is nearly impossible for individual investors to do on their own.

  This is another reason why it makes sense to invest in a venture fund like ours.

  Next slide.

  We’ve covered some of these points before, but we’re very active in the venture space. This helps us gather more data and visibility in the market so we can efficiently build a diverse portfolio for our investors.

  Speaker 1:
  We routinely co-invest with well-established VCs such as Andreessen Horowitz (a16z), Accel, Bessemer, Lightspeed, Accomplice, Menlo Ventures, and Khosla Ventures. Our network and value-add have made us a good partner to work with.

  We have also built multiple programs to invest early in promising ventures, targeting pre-seed and seed companies around the world. This engine creates rich early-stage opportunities, which allow us to deploy additional capital in the most attractive follow-on deals when startups raise future rounds.

  Next slide.

  Here are just some examples of well-established VCs we work with. As I mentioned, we actively co-invest with many of them in our portfolios.

  Next slide.

  We are potentially at a golden age in venture investing. Similar to the housing market, there are cycles between buyer and seller markets. Venture cycles tend to go through similar patterns. Sometimes the period is more favorable to startups for fundraising, while at other times it’s better for investors regarding valuations and protective rights.

  As you can see on the graph, the venture cycle is becoming more favorable for investors right now.

  Next slide.

  Here are some testimonials from investors and founders. Investors typically appreciate the access we provide, in addition to diversified fund choices within the Alumni Ventures fund offerings. We have many funds to pick from, making Allen Street a great choice for you.

  We also provide syndication opportunities for investors to participate in deals where we can get allocations beyond our fund investment model.

  Additionally, we provide frequent updates on venture markets and the deals we’ve completed. Many of our investors are becoming more informed venture investors themselves.

  On the founder side, they greatly appreciate our value-add on multiple fronts, including additional VC introductions and strategic brainstorming. They also value access to the alumni network and our broad portfolio ecosystem.

  Next slide.

  We invite you to join us on the venture investment journey with Allen Street Ventures.

  We target a portfolio of 20–30 companies. This is a 10-year fund. Once final fundraising is closed by the end of September, we’ll fully deploy the fund over the next 12 to 18 months, with reserves for follow-ons.

  As with all Alumni Ventures funds, we target one upfront capital call. We find this is more manageable for our investors.

  The investment minimum is $25,000, with a maximum above $3 million. The typical range is between $50,000 and $75,000.

  Next slide.

  Here are some examples of investments with Penn State alumni connections.

  We want to stress that we create a portfolio diversified across stages, sectors, and lead investors for each fund cycle.

  Of course, when we find portfolio companies currently run by Penn State alumni, that’s an added bonus. We want to support them as much as possible and continue building a community around these companies.

  Next slide.

  Here are some key investment terms. If you’re interested, you can contact us via email or access our investment portal.

  As I mentioned, investment amounts range from $25,000 to $3 million. You can use cash or retirement funds. There are advantages to using retirement funds, which are well spelled out in the portal.

  Feel free to review the investment portal for more details or speak with our senior partners.

  Next slide.

  Investments with Alumni Ventures may potentially be 100% tax-exempt from federal and some state capital gains through QSBS (Qualified Small Business Stock). QSBS refers to shares issued by qualified small businesses.

  A qualified small business is typically an active domestic C-corp with gross assets not exceeding $50 million when the stock is issued—so early-stage companies.

  Eligible investments will be noted on the K-1. QSBS benefits are only available to existing investors in the fund, meaning you need to sign and fund your commitment before we invest in a company.

  As a caveat, while we try to optimize for QSBS, we don’t always know upfront how many deals will qualify. However, it remains a meaningful benefit to our investors.

  Next slide.

  For investors who commit early, we provide loyalty rewards and fee reductions.

  One is based on committed capital—we provide a fee break depending on your overall commitment level.

  The other is based on timing—investors who join the fund during the first or second close are rewarded with a reduction of management fees.

  For Allen Street Ventures, the first close is in two weeks (end of July), the second close at the end of August, and the third close at the end of September.

  If you’re interested in investing, it’s better to commit early to receive the greatest fee reduction.

  Next slide.

  A typical VC fund is structured for five years of active investment and a 10-year exit cycle, with multiple capital calls for funding.

  Alumni Ventures’ model is a little different. Each fund is set up annually and will be fully deployed within 12 to 18 months.

  If you’re interested in the venture asset class, we recommend not trying to time the market. The best approach is to gain timing diversification by committing funds annually—dollar-cost averaging across multiple years to build up your venture portfolio over time.

  Next slide.

  If you have any questions, our senior partners are here to help. Their contact information is in the chat. You can also reply to our email—we’re happy to book a call and answer any questions.

  It’s great to have you all join us today. We hope you’ll join us on the venture investment journey with Allen Street Ventures.

  This concludes our presentation. Please feel free to reach out if you’re interested. We would love to see you join us.

  Thank you.