Just because hot start-ups like Kabam, ZocDoc and Sunrun are staying private longer than did tech companies of the past, retail investors don't have to be totally shut out of the action. They just need to be more creative.
One method gaining traction is the SharesPost 100 Fund, a collection of venture-backed companies that's been available to the investing public for the past year. With as little as $2,500, investors can buy into a basket of start-ups the same way they would purchase a mutual fund of public stocks and bonds.
Launched in March 2014 by former Silicon Valley Bank executive Sven Weber, the SharesPost 100 Fund currently has 19 companies, with two previous members—Flurry and Datalogix—having been acquired by Yahoo and Oracle, respectively. Investors that got in on day one have seen gains of 26 percent, more than double the increase in the S&P 500 over the same stretch.
For sure, this is a tough way to try to make a quick buck. Tech start-ups are inherently risky, particularly when fewer sophisticated investors start getting involved with very limited financial data on the companies. Weber says the key is creating a diversified portfolio of mature businesses (annual revenue of $50 million to $100 million) that in earlier days would have been perfectly suited for the stock market.
"The general public is missing out on it," said Weber, who's based in Menlo Park, California. "Public investors today are only getting access to companies that are already maximized in terms of enterprise value."