Investment

A novel and relatively risk-free way for family offices to invest in venture

VC newcomer Pirque Ventures is jumping on the co-investing bandwagon by offering families paying their $1,000 subscription a direct stake in each of its deals.

Born in Chile, Pirque founder Diego Alcaino is a former associate to Tim Draper, a billionaire veteran of the US venture capital scene.

In San Francisco where everyone talks about diversity and inclusion, venture capital has the most promiscuous and ruthless capitalism I have ever seen

The co-investing revolution spares family offices from paying fees to venture capital firms. Pritzker Private Capital is among those renowned for facilitating direct deals. 

Alcaino says: “I’ve never philosophically liked the idea of managers looking after other people’s money and not investing themselves.” 

He says some VC firms, like Sequoia, do an “amazing” job.  But he believes others become obsessed with hiring seasoned professionals to build out their network. General partners use bank loans to invest in their funds at no risk, leaving limited partners to shoulder the burden.

“In San Francisco where everyone talks about diversity and inclusion, venture capital has the most promiscuous and ruthless capitalism I have ever seen.” 

Alcaino started his career as a UK intern at investment bank Jefferies just before the collapse of Lehman in 2008: “I was worried because I didn’t know what was going on. Then I discovered nobody else did.”

Jefferies provided Alcaino with credentials to win a job with the Chilean government, encouraging entrepreneurs to locate in the country. Alcaino began spending more time in Silicon Valley, learning how to build the companies of tomorrow. 

Then he landed a deal with Tim Draper, an early, if eccentric, backer to ventures like Baidu, Tesla, SpaceX, Skype, Coinbase and Robinhood. Draper is also a bitcoin fanatic who said it would defy headwinds and hit $250,000 by early 2023.

Alcaino says: “I suggested we set up a programme for families to teach them about early-stage investing. You get programmes like Y Combinator which accelerate entrepreneurial companies. I wanted to accelerate the investors.

“Draper was opening up his family office to third parties. I ended up cold-calling people worth a billion dollars, giving them the opportunity to visit Silicon Valley for a week, learn about deals and see some real opportunities.”

Alcaino’s enthusiasm was catching. Around 70 families, weary of VC funds, signed up and some co-invested with Draper. Alcaino stayed with him for nearly three years: “I was learning about entrepreneurs and making friends with some pretty large families.” 

In due course, Alcaino started to write cheques for his own deals: “Family offices were telling me that funds were fine, but they wanted to see more deal flow – more direct opportunities. Deal platforms like AngelList were starting up and I decided to start my own business. I put all my savings into it.”

Rather than leaving his money in cash, Alcaino has invested in a variety of growth stocks, which have achieved returns of 41% a year from a selection of growth stocks.

Before long, Alcaino was online, and on the phone, at Pirque, hustling for opportunities. 

He raised capital by selling 14% of his business to third parties, led by friends and family, and seeks subscriptions of $1,000 a year for access to deals and research.

In the absence of a manager fee, Alcaino seeks to profit by putting energy into his deals, sharing ideas and updating research. To share the burden, he has just hired his friend Benjamin Vicuna, a former senior finance manager at Microsoft.

He is not interested in finding institutional investors, preferring private investors with skin in the game. He says he had an offer to start a VC fund from a Colombian investor but turned it down.

Alcaino now has 80 subscribers, including some billionaire families: “Next year, we want a thousand.” He has invested in thirty businesses, alongside other investors. 

He has just invested in Kate Boyle’s Banjo Robinson, which sends personalised letters to children by post, inviting their reply. Alcaino appreciates Boyle’s enthusiasm and dedication to building a network.

Other deals include a company that services the construction trade, a farmland syndication and a business that offers to tattoo individuals using ink that rubs away a few days later. He has also suffered failures from entrepreneurs unwilling to stay the course and has yet to find a unicorn. 

But Alcaino is in tune with positivity. He says he connects with entrepreneurs weary of dealing with “very sharp” VC firms out to generate fees and flip companies over a few years. “We can tell people we can put together a syndicate of private investors with connections who are prepared to be patient.”

 

 

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