If you've built wealth through property, shares, or running a business, your portfolio probably looks similar to those of your peers: real estate, blue-chip stocks, superannuation, and perhaps some fixed income. Reliable, tangible, proven.
But a growing contingent of sophisticated investors—from family offices to exited founders—is allocating a portion of their capital to something different: early-stage venture capital.
Not as a replacement. As a strategic addition.
What venture capital is and how it works
At its core, venture capital is backing promising businesses before they've hit the big time. It's equity investment into early-stage, privately held companies that are typically building something new: a technology, a platform, a category.
Since these companies aren't yet profitable or listed on the ASX, they raise capital from venture funds in exchange for equity. If the company succeeds, the fund—and by extension, its investors—shares in the upside.
Your role as an investor
As an individual investor, you don't need to become a startup expert or spend weekends mentoring founders. You typically participate as a Limited Partner (LP) in a professionally managed fund. The fund then deploys your capital—alongside other investors'—across a portfolio of startups.
Your role isn't picking winners. It's backing a team whose full-time job is finding and supporting them.
Why the smart money is shifting to private markets
Here's something worth noting: companies are staying private much longer than they used to.
In 1999, the average technology company went public after just 4 years. Today? They're waiting over 11 years before their IPO, according to data from the National Venture Capital Association (NVCA).
What does this mean for you? The most dramatic growth—the steepest part of the value creation curve—is happening while companies are still private. By the time most businesses list on public exchanges, sophisticated investors have already captured much of the upside.
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You're not the only one making this move
This isn't a fringe strategy. The world's most sophisticated capital allocators have been steadily increasing their exposure to venture.
University endowments now put 20-30% of their portfolios into venture capital and private equity. Yale's endowment maintains roughly 23.5% in venture capital alone, while Harvard has over 34% in private equity and venture capital combined, according to their most recent annual reports.
Even Australian superannuation funds—traditionally conservative allocators—are making the move. Major players like AustralianSuper, Hostplus, and UniSuper have all significantly increased their venture capital allocations. UniSuper made a notable $75 million investment into UniSeed—the investment arm shared between CSIRO and several major universities. AustralianSuper, the country's largest super fund, has established exposure to leading VC funds such as Blackbird, Airtree, and Square Peg Capital. According to the Australian Investment Council, superannuation funds are expected to invest more than $185 billion in private markets (including venture capital) by 2025. Overall, Australian super funds now make up about 47% ($35B out of $77B) of the combined total venture capital, private equity, real estate, private debt, and infrastructure investment in Australia.
They're not doing this on a whim. They've seen the numbers.
The returns that turn heads
Venture capital has outperformed every other major asset class on a top-quartile basis over the past 25 years—including shares, real estate, and even later-stage private equity.
| Asset Class (Top Quartile Returns) | 5-Year | 10-Year | 15-Year | 25-Year |
|---|
| Venture Capital | 48% | 38% | 29% | 57% |
| Private Equity | 25% | 22% | 27% | 31% |
| Real Estate | 27% | 24% | 26% | 24% |
| Large-Cap Equities | 11% | 10% | 9% | 8% |
Source: Cambridge Associates Global Venture Capital Benchmarks, 2022
What's particularly interesting isn't just the strong performance, but how differently venture capital behaves compared to traditional markets. When your ASX portfolio zigs, venture often zags—creating a rare source of genuine diversification. As with any asset class, returns vary significantly between managers, making fund selection particularly important – a topic we'll explore in later articles.
How venture capital sits in your portfolio
Let's be clear: venture capital isn't meant to replace your core holdings. It's a high-upside satellite allocation that sits alongside more stable assets like property and blue-chip shares.
| Asset Class | What You Get | When You Get It | Typical Role |
|---|
| Property | Rent + capital gains | Regular income + long-term appreciation | Stability, leverage |
| Public Equities | Dividends + market movement | Liquid, immediate | Growth, diversification |
| Angel Investing | Direct equity | Long-term | High involvement, high risk |
| Venture Capital | Equity in a portfolio of startups | Exit events (7–10 years) | Long-term, asymmetric upside |
What makes venture truly different is the asymmetry of returns. A single company in a portfolio can return 10x, 50x, even 100x the original investment. In a well-constructed fund, just one or two standout performers can carry the entire portfolio.
This dynamic—known as the power law—isn't a quirk of venture investing. It's the system working exactly as designed.
Why you can now access what was once off-limits
Until relatively recently, venture capital was the domain of institutions, family offices with hundreds of millions, and well-connected insiders. That's changed significantly, particularly in Australia.
Many Australian venture funds are structured as Early-Stage Venture Capital Limited Partnerships (ESVCLPs), which offer remarkable tax benefits, including complete exemptions from capital gains tax on eligible investments. These structures make venture capital particularly attractive for high-net-worth individuals.
The investor base is broadening rapidly. According to the 2024 State of Australian Startup Funding report, family offices and high-net-worth individuals now make up approximately 60% of Australian venture capital limited partners.
The entry barriers have lowered, while the potential benefits remain substantial.
Finding the right balance
So how much should you consider allocating? It depends on your overall wealth, liquidity needs, and risk tolerance.
Modern portfolio theory suggests that adding uncorrelated assets with higher return potential can improve your portfolio's efficiency. Venture capital's low correlation with public markets makes it valuable not just for its return potential, but for its diversification benefits.
For many high-net-worth investors, allocations of 5-10% provide meaningful exposure without overweighting illiquid assets. This creates the potential for portfolio enhancement without fundamentally altering your overall risk profile.
Where to go from here
If you're curious about venture capital and how it might fit into your investment strategy, there are several key concepts worth exploring:
A final perspective
Venture capital isn't for everyone. It requires patience, comfort with illiquidity, and understanding of how asymmetric returns work. But for investors seeking exposure to early-stage innovation and the potential for outsized performance, it represents an increasingly accessible option.
The Australian venture ecosystem continues to mature, with record levels of both capital deployment and exits in recent years. What was once considered alternative is becoming a standard component of sophisticated portfolios—not replacing traditional assets, but complementing them with exposure to tomorrow's growth.
A note from us
We're a venture fund. Naturally, we have a perspective on this space. But our goal here isn't to convince you to invest with us. It's to make venture capital a little clearer, a little less opaque, and a little more useful—whether you invest through us, through someone else, or not at all.
Most of what people hear about VC comes from the edges. Hype cycles, billion-dollar headlines, dramatic failures. But the reality is often quieter, longer-term, and more structured than people expect.
We're sharing what we know because we think more investors should understand how this asset class actually works. And because, if more people understood it, more capital might find its way into the kinds of businesses Australia needs more of.
That benefits the ecosystem. It benefits us. And if you're looking to build long-term wealth in a world that's changing fast, it will almost certainly benefit you too.
Disclaimer:
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.
