Allocate

Ok it's official. Future Proof agenda is out and the lineup is INSANITY Michael and I are interviewing Peter Mallouk for The Compound and Friends Joe and Tracy have John Rogers Scott Wapner has Jeff Gundlach Kitces is coming. Dr. David Kelly is coming. Dan Ives is coming. Brian Hamburger is coming. Sara Levy. Kevin Thompson. Too many names. I can't even! Speakers list here: https://lnkd.in/er7Ww8Pt Press release with more info here: https://lnkd.in/e_Nurs_7

🎉 Today is a 𝐁𝐈𝐆 day as Allocate turns 3! 🎉 Below is a picture taken just one week after we closed our seed round. When we started Allocate, it was based on a decade long observation of the broken nature of private markets for investors. Our goal was to build a private market engine that drove the transparency, ease, liquidity, and access historically seen only in the public markets. It’s still early days, and like all startups, we've learned a lot from our customers, partners, investors, and each other along the way. Solving difficult problems is hard, and building a startup is an all-consuming experience—you wake up and go to sleep thinking about it EVERY DAY. Days blend into each other, highs and lows are the daily price of admission, and things usually take longer than you’d like. But these are all things you start to embrace, loving the thrill of building something that could positively impact many people. After 22 years working in the corporate world at organizations that, despite being excellent, I couldn’t imagine not working at a startup ever again. We’re excited to announce new products soon, and to date, we've been fortunate to grow with the support of: • 46 full-time employees • Over $33MM in funding, including M13 SignalFire Basis Set Fika Ventures INTERA Investments Broadhaven Capital Partners Gopher Asset Urban Innovation Fund Tusk Venture Partners Ulu Ventures Anthemis Group Bedrock Unshackled Ventures and so many others. • Nearly $750MM in capital deployed by users through Allocate (AUM/AUA) • Partnerships with over 65 unbelievably high-quality venture capital firms since inception As we move into our 4th year, we know the real hard work is just beginning and there will be lots of challenges ahead. We sincerely appreciate everyone who has supported us, especially those who were there at the beginning like in the picture below.

The Adverse Selection effect in VC is a problem. Why am I seeing this deal? This is a question that family offices and individuals should always ask when they are sent VC dealflow Why? Well, adverse selection is a big risk in venture capital investing. As most know, the asset class has the highest dispersion of returns of any asset class. The difference between top quartile and bottom quartile has ranged from a difference of 15%-30% IRR over the last two decades. The “problem” is that VC still is still primarily insular. The best opportunities are still shopped in the circles of insiders (of course exceptions remain, and it’s dangerous to use absolutes, but it’s generally true). The firms and LPs that see the the highest quality deals consistently put in significant effort to ensure this. The problem that I’ve seen over the last 12 years working within HNW/FO circles, is that, especially with those that don’t have dedicated teams, strong networks, or an emphasis on VC, is that the quality of deal flow is nowhere near where necessary to get top quartile results consistently (w/o massive amounts of luck). During times like ZIRP where everything is working, VC may seem easy, but it in truth it's an incredibly difficult business to win. Quality deal flow, diligence, access, and proper portfolio construction are key to success. I can’t begin to count how many emails have been forwarded to me by FO/HNW about a direct deal SPV or a Fund opportunity that are anxiety inducing, and unfortunately there are many people that look to take advantage of investors. Some red flags to look out for: - Promises returns of (Insert some crazy number) - This person went to (Insert Ivy League school) and worked at (company), and therefore they are great.  - A bunch of logos/name dropping. I just received an email from someone that say “I have a hot opportunity with fund x, that’s backed by (names a bunch of individuals with big names” or Firm x has invested previously in (brand name companies). But when looking under the hood, they put in 10K in an angelist SPV or some secondary.  - Outlandish claims. “Firm performance is in the top 1% of all funds, and is looking for a [10x] return, and has proprietary deal flow.  - Rush to move quickly. “Need to get in quickly as its  getting over subscribed” Crazy fees. I just had a HNW send me a deal where the person was charging 2/20 for an SPV into another fund(!) - Generic charts of how VC outperforms other assets classes. In 2022-2023, I saw a bit less as many of these players started to retreat, but with the rise of AI and the public markets bouncing back, I’m seeing more of this. Getting quality deal flow in VC requires time. Time to build networks, time to diligence, and time to understand the asset class. It’s hard, and expectations should be tempered. Most importantly, be aware of the adverse selection effect.