Not Only Wolves: Who Rules the Wall Street

Active players in capital markets are frequently described in terms of wolves and sheep: those who set the conditions and those who accept them. As cleverly noticed in one VC-related article, if you find yourself in a market transaction and don’t know for sure that you are the wolf, then, sadly, you may find yourself the sheep.

This is especially true for venture investors who are considered the wolves to the highest degree: they approach private companies with offers hard to refuse and offer significant capital in exchange for equity. However, we believe that the global venture capital ecosystem is much more diverse than the simple wolves-sheep opposition: it also has other players such as lions and eagles. In the last 6 months, we have been meeting many of them, and we can safely say they have found their niches and coexist in the VC ecosystem just like their animal prototypes coexist in the wild.

The Lions and the Raptors

The Lions are private investors who know for sure what they want and search for young prey a.k.a. early stage companies. There are smaller and bigger Lions: the former have sold the successful companies they’ve built, and the latter have turned their corporations into cash cows and established family offices to manage their wealth. These two Lion sub-types now have plenty of capital and time to spare.

Lions invest to both increase their capitals and help new generations of young entrepreneurs succeed just like they did. They have entered the field of venture capital since this type of assets would let them achieve both goals simultaneously: if their investments turn successful, they get huge rewards while contributing to young startups’ growth. Thus, they mostly act either as business angels or early stage investors.

The Raptors fly high and search for prey that would fit their changing criteria. We consider eagles several groups of market players such as investment bankers, brokers, wealth managers and investment advisers.

1. Investment bankers work both for large investment banks and smaller boutiques. Traditionally investing in later stage companies on behalf of their clients, they now have access to lots of capital and sometimes get interested in how early stage companies work and how they can capitalize on them.
   For them, co-investing in startups jointly with VC funds gives better access to new profitable asset classes that were previously available only to the professional VC investors. In addition, making direct investments in private companies deepens their understanding of what is trending in different industries and business verticals.
2. Brokers and investment advisers frequently see investments in VC as alternative asset classes that widen their existing product offering. This makes their firms or boutiques more attractive to potential clients and increases the value of their services.
3. Wealth managers (especially those working for family or multifamily offices), in turn, frequently use investments as a research instrument: using VC funds to invest in a portfolio of private companies, they get access to firsthand market analytics and can thus estimate the growth in various industries and sectors. They can also invest directly into businesses and companies they are most interested in. By co-investing with multiple VC funds, they can see how the diversified portfolio performs. If satisfied, they can build relationships with their co-investors and later commit additional capital to the best funds as Limited Partners.

However, despite having their personal reasons for being interested in venture capital, all three types of Raptors share one idea: they understand that the world is changing, and changing quickly. The markets are highly volatile, the future is unknown, and the only thing that remains stable is the change itself, encouraged by private tech companies and startups that rapidly develop technologies and bring the future.

The macro view

Private tech companies and startups are growing too. The surplus of resources and exponential technologies have reduced the costs of founding a company, making starting a business easier than ever — the number of startups has tripled in the last decade. People coming from private capital sphere clearly understand this and want to capitalize on the changes. In addition, the amount of private capital under management has exceeded $5.8 trillion, which quickly lose value if simply kept in bank accounts. This money needs to be invested but the returns brought by traditional instruments are too small, so capitalists are searching for alternatives.

When talking to us, both Lions and Raptors showed interest in Limpid — our pipeline management and syndication platform that streamlines startup fundraising process. Just as rivers or lakes give water to every species of wild animals, Limpid enables every type of capital market players to make investments corresponding to their needs and goals. Private investors and wealth managers get access to the most promising early stage companies worldwide to capitalize on their potential. Investment bankers, brokers and investment advisers get the opportunity to invest together with the leading VCs that Limpid collaborates with. Thus, Limpid facilitates and ensures the profitable functioning of capital markets ecosystem.