A decade ago, you bought into the markets. Diversified across sectors. Caught some upside in tech. Played it smart. You did what every investor was told to do. But lately, something feels off. Returns are slower. Public markets are choppier. And the big wins always seem to have happened before you got in.
That's not your fault. It's just how the market works now.
The game has shifted
There are now 40% fewer public companies than in 2002. Startups aren't rushing to IPO anymore. They're staying private longer, growing faster, and funding that growth through private capital not retail investors.
That means the real value creation is happening earlier, behind the scenes, before anyone rings the bell at the ASX or Nasdaq.
By the time a company lists, the VCs have already won.
IPOs aren't launchpads anymore
We still treat IPOs like liftoff: the moment a business breaks out. But that's an old script.
These days, IPOs are more like cash-outs. The real breakout happened years ago, when a small team raised a few million, built something new, and started bending their category in a new direction.
That's when the upside compounds. That's when the risk is real. And that's when most public investors are still on the sidelines.
The alpha's already been priced in
The numbers tell the story:
Stripe raised nearly $10B across 24(!) funding rounds and hit a $95B valuation before even hinting at going public (it still hasn't).
Canva has raised $572 million across multiple funding rounds and reached a peak private valuation of $40B with only whispers of an IPO.
Uber delivered 20,000x returns for its earliest backers, years before listing.
By the time these companies hit public markets, if they ever do, most of the exponential upside is already baked in.
This pattern becomes clear when you understand how venture returns actually work. The exponential growth follows a power law distribution, where the majority of value creation happens in the earliest stages—precisely when companies are still private and inaccessible to public market investors.
Airwallex's recent Series F, widely seen as a precursor to an eventual IPO, perfectly illustrates this timing problem. When a billion-dollar growth fund admits they made their "most expensive mistake" by not investing earlier, it shows how even sophisticated institutional money struggles with this shifted landscape.
The pattern is global. The most spectacular returns flow to early private investors, not public shareholders.
Why venture capital is where growth happens now
Venture capital gives you exposure to the value creation phase, not just the liquidity phase.
It's where you:
- Back the category creators
- Own the upside of innovation
- Access uncorrelated growth
- And invest before the price gets set by the crowd
It's not easy capital. It's not liquid. But that's also why it works.
The numbers bear this out. Venture-backed companies account for 40% of US IPOs and 60% of global technology IPOs over the past four decades. But the VCs who backed them made their returns years before those companies ever went public.
This is particularly true for seed-stage investments, where you get the earliest access to companies that will define the next decade of technology and business models.
The quiet reality of modern portfolios
Today's most sophisticated investors, family offices, institutions, and high-net-worth professionals, are tilting private. Not just to diversify. But to go earlier.
"These broad trends demonstrate the rapid tilt towards private capital markets... Of all private market strategies, venture capital has seen the largest annual growth since 2012." — Ryan Burke, EY Global Private Leader
The logic is simple: if you want returns that look different, you need exposure that behaves differently. As we explore in our analysis of venture versus traditional assets, venture capital provides returns that are largely uncorrelated with public markets—offering genuine diversification when you need it most.
The Australian advantage
Australia's venture ecosystem is particularly compelling right now. We're seeing:
- Record levels of dry powder in local funds
- Government tax incentives through ESVCLP structures
- A maturing ecosystem with proven track records
- Access to deals at more reasonable valuations than Silicon Valley
The State of Australian Startup Funding 2024 shows our ecosystem raised $4.0 billion across 414 deals, the third highest year on record.
For Australian investors, the ESVCLP structure provides additional tax advantages that make venture capital allocation even more compelling from a total return perspective.
The opportunity isn't over... it's just moved
If your portfolio is still waiting for alpha in the public markets, it might be time to look upstream.
Because the best investments aren't coming soon. They've already started.
The question isn't whether you should have exposure to venture capital. The next question most investors ask is how much of their portfolio should be allocated to capture this opportunity while managing the risks appropriately.
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