WTF is Venture Capital & Private Equity?

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Hey friends 👋 ,

Happy Monday and welcome to the tenth issue of Through the Noise!🥳

Today we're taking a step back.

When I started this newsletter I made a couple of assumptions about you:

  1. You have a curiosity for startups, venture capital and investing

  2. You're interested in these topics enough to subscribe to this newsletter

I'm still collecting the dots on the demographic of the wonderful readers– that include you– who make up Through the Noise community. I'll drop a saucy survey so I can get to you know all a little better when we hit the big 10K (feel free to shoot me a DM on Twitter beforehand).

In the meantime, if you have a willingness to learn or fancy an introductory refresh, I hope the following piece will give you a gentle primer on the private markets.


WTF is Venture Capital & Private Equity?

Venture Capital (VC) and Private Equity (PE) are both part of the private markets. This involves companies who haven't had their shares publicly traded (you and I can't buy them). As seen in the graph from the WSJ, VC outperforms PE when it's successful but the returns are more volatile. Let's dig in a little further.

1. Stage of company development

VC involves investing in a new idea with an uncertain future.

The quality of the people is what makes and breaks the game.

PE involves investment into an already established company with positive cash flow.

2. Stage of investment

VC investment is focused on rapid growth firms, typically technology.

You look for companies that are ripe to disrupt the status quo.

PE invests into a proven concept.

You're looking to buy a company and restructure it to make it perform better.

3. Returns

VC returns target a 3-4x cash-on-cash (CoC) return.

CoC meaning if you invest $25,000 and get $75,000 back you make a 3x CoC return.

Successful VC investments become 10x or even 100x over a much longer period (4-10 years).

PE targets a 2-3x return over a few years.

4. Financing

VC involves all equity investment.

You're a part owner of the company, exchanging money for shares.

PE involves leverage.

With debt, you're a part lender to the company.

Debt finances a large part of the transaction, typically 90%.


Through the Noise Podcast

E10: Gaby Goldberg - Hopping Into the Crypto Rabbit Hole

Last week we recorded the tenth episode of the Through the Noise podcast.

Our guest was Gaby Goldberg. She is an investor at The Chernin Group (TCG) where she invests at an early stage in the intersection of consumer and crypto. In their latest round, TCG raised a $1 billion fund in June 2021.

We discussed:

• Investing in world-changing companies with TCG

• Greatest opportunities within web3 right now

• WTF is the metaverse?

This was an awesome one to record and a great breakdown for those non-native to web3 (like myself)!

Catch the episode on SpotifyApple and Callin.


That's all for today friends!

As always feel free to reply to this email or reach out @thealexbanks as I'd love to hear your feedback.

Thanks for reading and I'll catch you next Monday.