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Investing in private securities has become very popular. To meet this demand, robinhood (NASDAQ:HOOD) listed the first publicly traded venture capital fund to exclusively invest in private companies.
Typically, promising private firms raise capital primarily from individual investors and venture capital firms. Beginning with a seed round, funding may continue through multiple rounds if the company continues to fulfill its stated mission. Eventually, a company may decide to list its shares on the stock exchange and become a public company, but today, due to excessive regulation and cost, firms often try to stay private for as long as possible.
Robinhood Venture Fund I (RVI) began trading this week and currently has a market cap of $312 million.
RVI seeks to invest in a concentrated portfolio of 10 or more private companies considered “best in class” that are growing at the edges of their respective industries. RVI can use leverage to increase returns.
Some of the industries considered include Fintech, artificial intelligence (AI), Defense/Aerospace, Technology and more.
RVI does not anticipate paying regular dividends but does expect to distribute capital gains earned by the fund to shareholders. Shareholders can expect to receive a 1099 at the end of each year.
While a growing number of platforms provide access to individual investments in private firms, some investors may find a diversified, managed portfolio more suitable. Each investor must do his or her own due diligence to determine the risk he or she is willing to assume.
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