In case you’ve been living under a rock, the hot IPO news this year is that both Lyft and Uber are going public (along with other mega-IPOs Pinterest (PINS) and, probably, Palantir) — Lyft (LYFT) is already trading and generated a lot of excitement on the first day, though came back down sharply almost immediately, and Pinterest (PINS) just started trading this week and is doing very well.

Lyft and Uber are huge and unprofitable companies, with arguably no rational path to profitability in the next few years other than “fix prices” or “screw over drivers,” but they are also operators of fantastic and very popular services that almost every urban American relies on to some degree, and they are the biggest “brand names” to hit the IPO market in years. And they’re big — Lyft went public at a valuation of $20+ billion, Uber is hoping to go public at a valuation of over $100 billion, a step down from their last private market “valuation” of about $120 billion but still impressive.

And, yes, investors love IPOs. Probably more than they should, given that the real purpose of an “IPO” is usually as much “Employees and early Backers Want to Sell” as it is “We Need Capital for our Amazing Growth Plans,” but we all still remember the go-go days of the late 1990s when getting a piece of a dot-com IPO might give you 500% returns in a week, and there’s something universally appealing about being first. People still line up at the Apple store for the latest model on the day it’s released, and people still want to buy IPOs on the first day.

So it’s understandable that newsletters have often found that promising access to “Pre-IPO” shares in exchange for a subscription payment is an appealing enough offer to get possible subscribers off the fence and pulling out their credit cards. We’ve written about these a few times, so I thought I’d update my thoughts by checking out the latest teaser pitch along these lines from Ian Wyatt.

Here’s the headline from Wyatt’s “webinar” pitch, where he sells you on viewing his free live presentation… which, I am pretty sure, is going to pitch the same kind of “pre-IPO” investments he has touted before.

“Secret “Back Door” For Grabbing Uber Shares BEFORE the May 10 IPO…”

“How to BUY Pre-IPO shares of Uber and Palantir… just days before the company goes public…

“How to become an “insider” – investing alongside Wall Street bankers and billionaires!

“The secret backdoor that I’ve used to scoop up Pre-IPO shares of billion dollar tech companies.”

So no, I confess, I won’t be participating in the “live presentation” later today… though I have sat through a couple of his similar presentations in the past. So I’m just going to assume that he’s again pitching his Million Dollar Portfolio, as he did with similar “webinar” presentations touting ways to get in early on the Spotify IPO almost exactly a year ago and the Lyft IPO earlier this year.

So here’s my assessment of what his pitch probably covered…

Wyatt is almost certainly going to again be touting the major publicly-traded venture capital funds again — those are, on the exchange-traded side, GSV Capital (GSVC), which was an owner of Lyft shares (but not Uber), and Firsthand Technology Value Fund (SVVC), which doesn’t own any of the high-profile expected IPOs of this year… and on the mutual fund side, the SharesPost 100 Fund (PRIVX), which currently still lists Lyft as its largest holding but does also hold some Pinterest (PINS) and Uber shares (not many). Other likely high-profile IPOs in the near future like Palantir are also holdings of some of these funds, along with dozens of venture-backed companies that most of us have never heard of.

GSVC and the PRIVX fund are the most noteworthy publicly-available owners of the higher-profile companies as of now (SVVC doesn’t own Uber, Lyft, Palantir or Pinterest), though that doesn’t mean they’re going to surge higher instantly. These are diversified investment funds, and the returns are not going to be earthshaking for any of them just because of any possible “pop” in the value of Uber (or whatever the next “hot” IPO is). The biggest impact on them was Lyft, since both GSVC and PRIVX had LYFT as a very large holding before the IPO, but even that was pretty limited and none of these funds have a large enough Uber stake to make a meaningful impact.

Should you want to get exposure to those names? Well, that’s a different question. The same thing has happened with GSVC and SVVC in the past with the Facebook IPO, then the Twitter IPO, and if you had bought into GSVC back in 2012 because of that enthusiasm and held onto the shares, you would have lost a lot of money buying into previous spikes in the the “price to book” valuation.

Of course, during the pre-Facebook and pre-Twitter runs in 2012 and 2013 GSVC traded OVER book value, not just at a smaller discount, so things might not be as dramatic… but they have clearly been challenged to turn a few good early investments in successful companies into shareholder returns, and long-time shareholders have lost a lot of money.

That’s not just to pick on Wyatt, who has touted this fund many times. I’ve owned GSVC in the past, tempted by huge discounts to NAV, but it didn’t particularly work out well for me, either… but looking at funds like GSVC at huge discounts before a mania emerges about some high-profile upcoming IPO works out a lot better than buying during that mania at much higher prices. If you want a lot of exposure to Uber for the long term, just buy UBER shares once the stock is trading — you will likely pay more than the early investors did, maybe even more than PRIVX paid for their stake in recent years, but you won’t also be saddled with their management costs and the 30 companies they own that you don’t care about.

Or better yet, wait it out and see if Uber shares collapse in a few days like LYFT did, or in six months once the lockup expires and insiders start selling, or whenever people move their profit lust on to the next shiny object or the first wave of ugly news hits the shares.

It’s very rare for the IPO price to be the all-time low for a stock, there are almost always opportunities to buy during periods of much lower enthusiasm.

And how about the SharesPost 100 Fund (PRIVX)? That’s structured as a mutual fund, so it offers shares and redemptions (which are limited) only at the NAV, so you can’t ever buy in at a discount (or premium), and it’s far less liquid than GSVC. They do, however, have a big investment in Lyft, about 7.5% of the fund, and much smaller positions in Pinterest and Uber. Returns will not be as dramatic up or down as GSVC, most likely, but if Uber somehow goes from a $100 billion company at the IPO to a $200 billion one in the next few months (I certainly don’t expect that, but can’t predict the future very well), then that would have a small positive impact on the NAV for the PRIVX fund.

None of these investments is going to bring you a life-changing payday, and funds like these are expensive and high-friction investments in what is still a fairly opaque and illiquid market for mostly large and established private venture-funded companies. It’s an interesting asset class, but I wouldn’t look to these funds for IPO-based riches in any given stock or any given year.

I have held a token position in the PRIVX fund for a few years now, though, and checked in on it last Fall — so I’ll share with you what I wrote to the Irregulars at that time (the holdings and performance have not changed dramatically since, though the Lyft excitement has upped the NAV a little bit — this bit is unchanged, other than the updated charts at the end, from what I wrote to the Irregulars as a part of the Friday File on September 28):

looking into all those private telemedicine companies got me thinking about that venture capital fund I put a small amount of money into a few years back… we haven’t gotten teased as much recently about these kinds of “buy the unicorns before they’re public” funds, probably mostly because they’ve generally been disappointing, but I thought I should at least take a look at it for you.

That fund is the Sharespost 100 Fund (PRIVX), which I believe is still the only mutual fund that focuses on pre-public companies — their goal is to invest in stocks that are in the final runway to going public or otherwise generating an “exit,” ideally within a few years of an IPO. They are an “interval” mutual fund, so you can buy and sell at net asset value (NAV), but there is no daily liquidity — you can only sell your shares once per quarter (and there are some limitations on even that), and they also, probably not surprisingly for a small venture capital fund, have a very high expense ratio — so those two negatives are most of the reason why I sampled it with just a small investment back in 2015.

That strategy of theirs seems more challenging than it used to be, now that there’s so much venture capital money chasing these companies… including the “unicorns” who are now so common we should probably call them, I don’t know, “squirrels.” Except they’re pretty big, so maybe… Caribou? You pick what you like. (If that doesn’t make any sense to you, “unicorn” was a name coined in Silicon Valley just five years ago to refer to a private startup that had risen to a $1 billion valuation — it should have been something rare instead of something fictional, of course, but that was the idea… and it was less than two years after the term was coined that we crazily got to the point that there were 50 or 100 unicorns, led by the super-unicorn Uber.)

The point is, the plan was to invest in these “mature startup” companies after they had established some bona fides (like good revenue, or a hope of profitability), and ride the closing of the valuation gap from a few years pre-IPO through the IPO process and perhaps for a couple years post-IPO, realizing the gains.

That might end up being a dumb idea. I don’t know if there IS a valuation gap anymore, given all the money chasing those caribou (yep, I’m settling on caribou), but there have certainly been some “wins” in the PRIVX portfolio — DocuSign (DOCU) now carries an $8 billion valuation after going public early this year, and that was and remains a PRIVX portfolio company, currently their largest holding. Lyft is continuing to grow in the shadow of Uber and is in a race with them to be the first ride-sharing IPO, though some leaked info on their financials indicates that the 70/30 market share split continues in some key markets, and we’re not particularly close to the price war between the two settling down (and, of course, both are losing buckets of money, most of it contributed by shareholders eager to “get in early”).

The returns for the SharesPost 100 Fund during these past few years of “caribou” mania? They’ve been weak… but positive. The fund has come respectably close to matching the S&P 500 on a cumulative total return basis (9% to 11.5%, so the returns of PRIVX were about 20% less than those you would have gotten from an index fund)… but there’s also a sales load that most investors would have paid of 5.75%, so the return after that is weaker still, 7.5% annualized since inception. Still positive, but trailing the S&P by a lot — and, thanks to the huge outperformance of the FANGs and similar large tech stocks, trailing the tech sector by a ton (the S&P Technology index returned something close to 20% annually over that time period, and most of the startups in the fund would be called “tech stocks”).

That’s fine IF this is an asset class that can generate steady returns — if “harvesting” the valuation bump that companies get late in their lives as private companies and early in their publicly traded lives is a sustainable thing and doesn’t generate volatile returns, you don’t need to beat the market. The strategy of looking for more mature startups doesn’t give them a great chance of coming up with real 1,000% blockbusters, so they do need consistency if they’re not going for the “1 in 100 will make us filthy rich” strategy… and it’s probably too early to be certain about whether they’ll have that, though the past year or two has definitely seen improvement.

What does that “no likely blockbusters” mean? Well, it’s part of what turns off some investors, I imagine, since “venture capital” makes one think of investing in Mark Zuckerberg while he was still coding in his dorm room. SharesPost’s strategy would have had them buying Facebook a few years before it went public at maybe $20 a share, not buying when Mark Zuckerberg was dropping out of school and the shares that folks like Peter Thiel were buying were some tiny fraction of that amount… buying Facebook at $20 would obviously have been delightful, but a few years after the IPO that would have been just a 200% return or so, not an earthshaking number.

My major concern about the SharesPost 100 Fund back when I put a minimum amount into the fund and was talking with the fund managers back in 2015, was that I didn’t know if they’d be able to scale up and invest in attractive companies at reasonable prices — there’s clearly too much money flowing into venture capital now and inflating prices, but that was also true (to a lesser extent) a few years ago, and this little mutual fund can’t offer the full support that major VC firms do in terms of supplying board members and management expertise and the other “soft” benefits that venture capital investors provide for their portfolio companies to help them along. They aren’t the first call a company makes when they need money.

So what to do? Things look quite a bit better for PRIVX than they did a year or so ago, frankly, mostly because DocuSign and Zuora went public as pretty big holdings, and were well received. I don’t mind still having that minimum amount invested with PRIVX, I still find it interesting to review their reports and look at the companies coming up through their system… but I wouldn’t make it a meaningful part of my portfolio. The expense is just too high — the annual expense ratio is 2.5% until next May, when their fee waiver expires and they are likely to bump it up to 3.75%, which is a huge bogey to overcome over the long term. That’s an understandable expense ratio given the costs of vetting and monitoring private companies, but it really just goes to emphasize the point that PRIVX may just be too small to be an efficient venture capital investor… they are getting closer, but they aren’t quite pulling enough capital in to cover their costs or give them huge influence in Silicon Valley (they have about $135 million in assets under management now, up from $20 million when I was first writing about them, so they’re moving in the right direction… partly by adding some additional share classes to attract more investors).

And how have their investments gone so far? They have had a bunch of “exits” as companies went public or were acquired (though they haven’t exited all the public ones), and most of those have been profitable. And on a surprising note, at least for me, they have been able to invest most of their capital, which is good — short term investments were only about 20% of the fund as of the end of June. The total fair value of the portfolio (which is either their estimate of the fair value based on most recent funding rounds, for the private companies, or the public value for those that have gone public, like Spotify and Docusign) is about $121 million, and they have invested a total of $88 million, so that means they’ve grown their portfolio by about 30% over the years (not annualized, that’s total — the earliest investments were made in the fall of 2014) — the biggest gainers have been DocuSign, Zuora and Lyft at this point, and those are also among the largest and most liquid investments (Docusign and Zuora are public, Lyft will probably be public by next year and has lots of active private shareholders and a good secondary market trading those shares). The performance of the fund has been worse than that because some poor performers have cycled out of the portfolio, and because building these positions has generally been slow and piecemeal work — which means a lot of their older holdings started out very small, and that the large cash position in the portfolio also depressed returns.

There’s very little turnover, as you would probably expect. Most years only 7% or so of the portfolio turns over, so things probably won’t change fast… I wouldn’t try to convince anyone else to buy into this fund, but it’s an interesting diversifier and I’ll let it ride.

Here’s what the fund has looked like (in blue) compared to the two widely-followed publicly traded venture capital funds that don’t trade at net asset value — that’s GSV Capital (GSVC, orange) and Firsthand Technology Value Fund (SVVC, red), both of which, as you can see, have ended up with fairly similar returns, at least until this recent Lyft pop, but have been wildly more volatile (and they’ve all failed to keep up with the S&P 500, which is that green line) — I pulled these charts from my Lyft article that I posted about a month ago, so they’re slightly out of date:

And, in case you’re wondering how these funds would have done if you had bought into them following Wyatt’s pitch a year ago for pre-Spotify investing, this is that chart:

And that’s about all I’ve got for you today, dear friends. Go out and chose those Uber shares into a hoped-for pop on the first day if you like, or beg your broker for an allocation at the IPO price (the shares are probably all committed at this point, institutions seem to still be hungry for growth ideas), but if you want to invest in publicly available venture capital funds, well, be prepared for spikes of enthusiasm around brand-name IPOs married to long periods of bad performance… and don’t count on beating the S&P 500.

And I should also note that there are other “back door” ways to invest in Uber as well — not quite as many as Lyft, since LYFT was a little more active in soliciting industry partners and investors and had some publicly traded investors with meaningful stakes, like Rakuten and GM and Carl Icahn’s investment fund, but the two big private investors in Uber that you could buy, if you wish, are Softbank (SFTBY) and Alphabet (GOOG). Both, of course, are massive — but their holdings in Uber are pretty big, so it’s possible that a dramatic surge in Uber could have a small impact. Softbank and its Vision Fund (which also uses outside capital, so the impact on Softbank’s actual balance sheet is muted) own something like 15% of Uber, bought mostly at a valuation between $50-$70 billion, and Alphabet owns about 5% of Uber. If Uber’s worth $100 billion, and keeps surging, that probably helps Softbank’s balance sheet a bit… though the impact on shares from other large Softbank investments like WeWork and Sprint will probably be more important over the coming year… for Alphabet, with its $800 billion valuation, it’s almost a rounding error.

Have any thoughts on Uber or venture capital investing? Actually sit through the Wyatt presentation and think he had something new to entice us? Let us know with a comment below.

Disclosure: I have money invested in the SharesPost 100 Fund, and own shares of Alphabet and Facebook, and call options on Twitter. I don’t own any of the other investments noted above, and will not trade in any covered stock for at least three days, per Stock Gumshoe’s trading rules.