Many of the companies that meet our investment criteria see significant success. However, these companies are rare and opportunities to invest in them, prior to IPO, are highly competitive.
Historically, the types of opportunities that the fund targets were largely reserved for some of the world’s leading venture funds. However, more companies have recently opted to allow smaller sophisticated investors to participate in their investment rounds. While this prevents an apples for apples historical returns analysis, an analysis of hypothetical returns (hypothetically assuming the investor did not dispose of their position until the third quarter of 2011) from opportunities that have some similarities with the opportunities we target is included below. The core similarities are high margins, an enormous number of customers, limited competition and significant growth prospects. While only a smaller percentage of companies, particularly across a portfolio of companies, will reflect these returns, we believe that our strategy targets those companies with a higher likelihood of generating these types of returns. Still, factors like timing, business conditions, economic conditions and market conditions could vary returns significantly. Adjustments in the timing of the investments below would cause positive or negative changes in the return profile and investments in private companies, albeit late stage private companies, are generally risky and speculative in nature with a possibility of the loss of all or part of principal and a lack of liquidity.