How venture capital stacks up: a comparison with other asset classes
Before allocating to VC, it’s worth understanding how it compares - on risk, return, liquidity, and diversification - with the assets you already hold.
Most investors are familiar with the usual suspects: property, shares, maybe a touch of private equity. Venture capital, by contrast, is often misunderstood or overlooked entirely.
But it serves a very different purpose in a portfolio.
Where traditional assets rely on stability, income, or leverage, venture capital delivers uncorrelated growth and asymmetric upside. To understand where VC fits, it’s helpful to compare it directly to the asset classes many Australians already hold.
Australians love property, and for good reason. It's built generational wealth through rising prices, familiar rules, and most importantly, easy access to leverage. With just a 10 percent deposit, you can control a high-value asset, amplify gains in a rising market, and claim tax advantages like negative gearing and capital gains discounts.
But leverage cuts both ways. Property concentrates risk in a single asset class, often in a single city. Most investors hold just one to three properties, meaning their entire portfolio depends on a handful of locations and policy settings.
The concentration problem
Property portfolios are inherently concentrated by geography, asset type, and even tenant risk. Venture capital offers a different kind of exposure. Sector and location diversification across 20 to 50 high-growth companies is common, often led by founders solving national or global problems. You might be backing AI logistics in Sydney, healthcare in Melbourne, and agtech in regional Queensland, all within a single fund.
The tax equation
Property offers familiar advantages: negative gearing and the 50 percent capital gains discount after 12 months. But these benefits come with active management, and interest rate sensitivity.
Venture capital, when accessed through an ESVCLP structure, provides compelling tax benefits:
There’s no landlord stress, no maintenance, and no debt exposure.
Public shares offer liquidity, transparency, and dividend income. You can trade at any time and company valuations update daily. Share markets provide exposure to established businesses with proven revenue streams.
The timing advantage
However, shares limit you to companies that have already gone public. By that time, the highest-growth phases have already occurred in private markets.
EY research shows 40% fewer publicly listed companies exist today than in 2002. Companies now stay private longer, capturing more value creation before public listing.
When startups do go public, early venture investors have already captured the exponential growth phase. Canva delivered exponential returnsto early investors before considering public markets (and an IPO still seems far away).
Market correlation differences
Public shares move together during market volatility. When global sentiment shifts, most stocks fall regardless of individual company performance.
Venture capital shows negative correlation with public markets, where returns depend on innovation cycles and company-specific execution rather than broad market sentiment.
Angel investing is the most hands-on, high-upside way to invest in startups. It puts you close to the founders, the ideas, and the early decisions that shape outcomes. But that proximity comes at a cost.
To do it well, you need:
Most investors don’t have that mix of access, capital, and time.
With venture capital, you get:
VC offers scale, structure, and expert management – without the hands-on commitment.
Private equity focuses on established companies with steady cash flow and proven models. It uses leverage to amplify returns and drives value through operational improvements. The playbook is consistent - buy well, optimise, exit.
Venture capital takes a different approach. Instead of acquiring a manufacturer, it backs the startup reinventing the manufacturing process. These are earlier-stage bets with higher upside, but also more uncertainty.
Risk-return profiles
Private equity delivers more predictable outcomes. Returns typically sit in the 15 percent IRR range, with low failure rates and consistent performance across funds.
Venture capital aims higher. Top funds target 25 percent plus IRR, but returns are skewed - most companies fail, and a few drive nearly all the gains. This power law distribution creates greater variance between top and bottom quartile performers.
Over the long term, Cambridge Associates data shows VC has outperformed PE. But it requires a longer time horizon and greater tolerance for volatility.
25-year top-quartile performance shows venture capital's return advantage.
These figures represent the best-performing funds in each category. Venture's advantage grows over longer time horizons, reflecting compound growth from successful portfolio companies.
Each asset class plays a different role. Property builds long-term wealth through leverage and tangibility. Shares offer liquidity and income. Private equity improves what already works. Angel investing gives you proximity and influence - if you have the time and capital.
Venture capital offers something else: exposure to innovation, sectoral diversification, and returns that don't move with the market.
Used well, it complements traditional investments rather than replacing them.
So the question becomes: if VC has a role to play, how much should you allocate?
This article is for informational purposes only and does not constitute financial advice or an offer to invest. Investments in venture capital carry significant risks and are suitable only for sophisticated investors. For more information, please request our Information Memorandum. This offer is not available to retail investors.
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