{"id":1838,"date":"2013-02-24T22:00:00","date_gmt":"2013-02-25T06:00:00","guid":{"rendered":"https:\/\/masonmyers.com\/?p=1838"},"modified":"2015-01-28T12:58:41","modified_gmt":"2015-01-28T20:58:41","slug":"investment-returns-venture-capital-vs-greybull-stewardship","status":"publish","type":"post","link":"https:\/\/masonmyers.com\/investment-returns-venture-capital-vs-greybull-stewardship\/","title":{"rendered":"Investment Returns of Venture Capital vs Greybull Stewardship"},"content":{"rendered":"

\"Investment<\/a><\/p>\n

Greybull Stewardship investment returns are outperforming venture capital as an asset class. Table Source: Cambridge Associates.<\/p>\n<\/div>\n

Investment returns in venture capital as an asset class have not been good for a long time.\u00a0 To me, that result is somewhat predictable.\u00a0 Great investment returns are not going to come from anything where you have to swing for the fences with every investment (or should I say gamble) and expect to lose money on a lot of the investments.<\/p>\n

Great investors know that the first rule of good investment returns is to not lose money on any investment, if you can.\u00a0 It just takes too much good fortune on the rest of the portfolio to make up for the losses.\u00a0 An investment philosophy that does not swing for the fences each time but instead hits steady singles, doubles, and triples should outperform every time.<\/p>\n

20%+ Investment Returns for Greybull Stewardship<\/h2>\n

The early returns from my investment fund, Greybull Stewardship<\/a>, have been very good — averaging over 20% net of fees.\u00a0 We are focused on the marriage of companies and existing management that already have a good track record of financial results.\u00a0 We make sure the management has plenty of equity to get us all aligned and let management run the company, helping when we can.\u00a0 And, the most difficult of all, we do not try and change the company (culture, strategy, growth rate, etc.) and risk disrupting the company’s track record of success.\u00a0 We can do this because we do not have to prepare the company for sale in another 3-5 years and we can treat the company as if it is our family’s only asset to be treasured and grown with care.<\/p>\n

Our strategy takes several risks out of the venture capital equation.\u00a0 First, the businesses are already proven so we aren’t gambling on a new product or “product market fit”.\u00a0 Second, we are not gambling on management because the management already has a good track record in managing the business.\u00a0 Third, we are not gambling on a new strategy to attempt to sell the company in 3-5 years.<\/p>\n

My goal is to make Greybull Stewardship the perfect home for unique, well-managed businesses<\/a> where the management wants to keep going and own a lot of equity (either minority or majority stake is fine for me).\u00a0 There are not many places for owners to find this — strategic buyers will change everything and traditional private equity will only be focused on a sale in 3-5 years.\u00a0 And, I want to earn good returns for my investors in exchange.\u00a0 So far, so good.<\/p>\n

NOTE: I know that venture firms in the top quartile or top decile outperform the class and do very well, so it may be unfair to compare Greybull Stewardship to the entire asset class of venture capital.<\/p>\n

Cambridge Associates<\/a> provided this data as of September 30, 2012.<\/p>\n

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