The Old Money, Venture Capital Boys Club Needs To End Now

In the last two editions of The Juice, we covered two huge European startups. One bigger than the other and closer to an IPO. See today’s Freshly Squeezed section for more on Sweden’s Klarna and France’s Mistral AI. 

As we continue telling you everything you need to know about alternative investments, it’s time to tie a lot of what we have been talking about together. All in preparation for more on the ins and outs of alts this month and what will be an ongoing series in 2025 on how to blend traditional and alternative investment approaches into one killer long-term portfolio. 

To set the stage let’s focus on venture capital because it’s the area most everyday investors know best. It can also be among the most lucrative. We make that last statement with some important caveats and qualifiers. 

The Juice thinks investors need to rally to level the playing field between Wall Street and Silicon Valley and the rest of us on main street even more. Because as much as we love the increased access we have to alternative investments, including private equity, we not only need… we deserve more. 

• As it stands, there are some pretty amazing opportunities out there. The Juice recently highlighted several platforms, including StartEngine and Fundrise, that give retail investors access to exciting startup investments. For example, it’s pretty cool to think that you can invest in a late-stage company such as Canva via Fundrise’s Innovation Fund. 

However, your access to companies such as Canva is too few and far between. The next huge IPOs — such as Klarna and Mistral AI — are still only available to the big money, good old boys VC network that made billions on everything from Amazon to Google to YouTube.

You can’t get at these companies until they go public. And, even then, IPO access for small investors is far from guaranteed. Plus, investing in IPOs can be a risky fool’s game (see the link below about Sweden’s Klarna for an example). But this doesn’t matter to VCs. They even make killings on the IPOs that flop. The ones that often leave retail investors holding the bag. It’s nothing short of messed up and proof that the game is still rigged to a meaningful extent. 

And, the biggest, most interesting investments on StartEngine, still only go to accredited investors via StartEngine Private. Through this StartEngine platform you can invest in big pre-IPO names such as Acorns, Chime and Discord. But, again, you need to be accredited, which requires, as per the SEC, net worth of over $1 million (excluding primary residence) and income over $200,000 (individually) or $300,000 (with spouse or partner) in each of the prior two years with the anticipation that you’ll do it again in the current year. 

This is a tall order for many small, everyday investors. 

If you ask the SEC why they have these restrictions, the answer will be something to the effect of we need to protect retail investors. Without the financial wherewithal or expertise (you can qualify as accredited if you’re a financial pro in some instances), investors can get hurt playing the risky game of investing in startups. 

This ties together with something The Juice took exception to in the story at the link in today’s Freshly Squeezed section that asked if alts are only suitable for “professional investors.” 

We wonder who has this opinion? Probably the big money. And we think it’s like the same reason why large factions on Wall Street don’t like crypto and couldn’t stand that investors used social media to wreak havoc during the pandemic. 

If it’s a trick, tool or perfectly straightforward investment opportunity that was once something only available to the 1%, the big money can’t stand seeing things get even a little democratized. Even worse, if relatively small individual investors come up with tricks and tools of their own to beat big banks and brokerages at their own game. And twice as worse if the little guy gains access to complicated investment funds and strategies it doesn’t have the resources to create in a traditional brokerage account. 

Ultimately, The Juice thinks that there’s nothing with more access to more products. The big money shouldn’t be deciding what’s good or bad for the rest of us unless we ask them for their advice.

Simply put, we don’t need the government, Wall Street or any other big money faction to save us from ourselves. We’re big boys and girls. You’ll let us have access to penny stocks and complicated options trades, but you won’t let us get into — alongside the huge VCs and investment banks — on pre-IPO names such as Klarna? Companies that absolutely will exit and make their early investors rich. 

No doubt—in theory and often in practice, VCs add value by guiding startups. However, there’s no reason why the rest of us can’t have even a little piece of that pre-IPO, pre-exit pie. The only reason is that the big money doesn’t want us to have a piece. 

The Bottom Line: We’re not sure what it will take, but we think there needs to be a groundswell to change the rules of the game. For every dollar of big VC money a startup takes, there ought to be equal access made available to retail investors through existing brokerage platforms and investing apps. 

Politicians such as Bernie Sanders love to act as if they’re on the side of everyday Americans, but against the corporate interests and other elements of the big money in Washington, in Silicon Valley and on Wall Street. But where are they putting forward legislation to help middle and upper middle class investors have access to investments that continue to help the rich get richer? 

If you’re going to write to your Congressperson about anything, this probably should be it. You can also write to The Juice with your thoughts by using the feedback link at the bottom of the page.

• The Profitable Swedish Buy Now, Pay Later Company About To IPO
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• The European AI Company Trying Take On Open AI And ChatGPT
• Are Alternative Investment Options Only For ‘Professional’ Investors?