“Become one of 250 Partners in a VC Firm”

Can you really "Put this multi-billion dollar Silicon Valley VC veteran to work for you?"

By Travis Johnson, Stock Gumshoe, March 22, 2016

Originally published August 10, 2015, the article below has not been updated but the ad is now rolling again and I’ve added some comments to the discussion following the article.

—from 8/10/15—

This latest pitch from Michael Robinson for his Radical Technology Profits (selling a $3,900 lifetime subscription) caught the eye of many of you over the past day or two, so I thought I’d comment on it briefly.

It’s not really a new ad — parts of it are new, and the description of the “private” deal he has to get you in as a partner in this VC firm for $2,600 is a bit different, but the investment is fundamentally the same.

He’s pitching what is one of the few “mutual funds” (it’s not quite that, but very similar) that are focused on late stage venture capital (maybe the only one, I don’t know of others), and the ad implies that getting in on this fund is a way to generate those massive returns you imagine that venture capital funds make — the 200X or greater returns when Uber goes from a crazy idea to a $50 billion company.

Here’s a bit from the ad:

“… the deal I’m recommending lets you become a ‘partner’ in one of the most successful ‘VC’ firms in the country.

“It’s located here in Silicon Valley…

“And run by a VC expert who’s profited from some of the biggest IPO and strategic acquisition “exits” of the decade, including Twitter, Lifelock, and FireEye.

“And he’s made billions in the process.

“His firm is currently invested in 26 of the most exciting and fastest-growing new technology companies in the world.

“Each is potentially anywhere from a few months to a few years away from an initial public offering – an IPO….

“It’s a special deal I’ve uncovered on your behalf with the potential to pay off in huge multiples.

“The kinds of returns that could grow your money 200-fold (or better) over time.

“That means a single $2,600 investment in this business deal today has the potential to transform into over $520,000.”

Now, of course the lawyers got to read through this ad, and you can be pretty sure they were double checking to make sure he put in the “over time” bit, and the word “potential” — otherwise this is a completely ridiculous promise. Even if this fund is run pretty well, and it gets in on some reasonably solid companies in the years before they “exit” the private markets (either by IPO’ing or getting bought out), they’re not going to post returns like that over any conceivable period of time.

Some of their investments, if they’re very fortunate and strike VC gold, might post fantastic returns. But the point of a venture capital fund is to distribute your investments across a large number of companies because most of them won’t go anywhere. Most venture-backed companies don’t end up being winning investments, but there’s a survivor bias in the media coverage because you certainly hear about the huge winners and imagine that they’re far more common than is really the case — in truth, you need those occasional huge winners to make up for the mass of mediocrity.

He gives a couple examples in the ad of companies that are among the 26 in this fund’s portfolio, and some of them are interesting and potentially exciting, and a couple have earned billion-dollar-plus valuations on the private market… though they mostly did that before this particular fund bought shares, since they’ve only been around for a year or so and they’re trying to be conservative and invest only in viable, revenue-producing pre-public companies where a lot of the risk (and a lot of the gain) have already been taken by other investors.

One of the examples is Jawbone, one of the better known companies in this fund’s portfolio….

“VC heavyweights were investing in a pre-IPO Jawbone back in 2007, when it was valued at just 18 cents a share.

“Today, it’s ranked number 22 on the “Billion Dollar Startup Club” at a $3.3 billion valuation… or $11.27 a share.

“That’s a 61-fold increase in value.

“And it hasn’t even gone public… yet.

“When it does, the returns could be off the charts.

“And as a partner in this venture capital firm, you can be right there, when Jawbone goes public, as one of its pre-IPO investors.”

This particular fund has about $1.6 million worth of Jawbone shares in its portfolio, according to their latest SEC filing (they have to use judgement and private market financings to guess at a valuation, of course, since there is no public market price). The fund’s total size is about $32 million, so that means Jawbone represents about 5% of the fund, one of their largest holdings. If Jawbone triples in value in the leadup to and/or shortly following an IPO, which I would consider to be a little bit optimistic (that would be a $10 billion valuation, roughly), then those shares might be worth $5 million to the fund. Assuming no other changes in the fund, no other holdings that lost or gained value, then that would represent a 10% gain in the net asset value of the fund. Which is what matters to you, because you’re investing in the fund, not in the individual company.

A 10% gain in a fund is nothing to sneeze at, of course, and this fund has actually beaten the market for much of its short life. But it’s also not going to turn your previously underfunded retirement into a lavish music video shoot in St. Barts.

And other examples are given as well, the one that truly strains credulity is DocuSign, because no matter what the value of that company ends up being someday the fund’s stake today is so small, with a current valuation of $50,000 (out of that same $32 million), that even if DocuSign increases in value 100 times — almost inconceivable — that would still be only enough to boost the net asset value of the fund by about 15%.

What are we talking about here? I’ve buried the lead a bit but this is, of course, the SharesPost 100 Fund (PRIVX), which I made a minimal investment in several months ago when Michael Robinson was last touting a similar “private deal” to get in on this investment. I didn’t go through him, of course, nor do I subscribe to these newsletters whose ads I follow (that would take the sport out of the teaser solving, naturally), but I did put a few thousand dollars in to see what kind of communications I received, and to remind me to follow the fund and see what they’re doing. The basic information about the fund is available here on their website.

They’re not all that active, frankly — though the fund is doing decently well, up 5-10% or so since I bought in. They still have a huge cash allocation, and I assume that the main challenge remains finding decent private companies who are willing to sell them enough equity to make the investment worthwhile, or getting to participate in funding rounds with the larger private equity players. In many cases, they are not participating in big funding rounds — they have for a few of the investments in their portfolio, but many of their investments are so small that they are very likely just buying out insider shares.

This isn’t that unusual, of course — getting equity is a big part of working at a startup, particularly one in Silicon Valley or in the tech space, and if the company is still several years from an IPO then all the early hires, the engineers and office staff and sometimes even the founders, end up with decent-sized shareholdings but often without huge salaries… and no way to sell their shares so they can buy their boats and Teslas and whatever else is needed to gild their lives (or, given the crazy real estate market in Silicon Valley, even to buy a home). So that’s where Sharespost gets a fair number of the shares they buy, they provide liquidity for selling insiders — which might become a larger business over time, particularly since successful companies are finding it so easy to get venture capital financing that they hold off on going public for much longer than they used to. Indeed, for many companies, like Facebook, creating a liquid market for their shares so employees could value their options and share holdings was probably a major part of the reason for going public — they didn’t need new money, but they did need a way to recycle the capital a little bit and let some early investors and employees sell some shares efficiently… and to create a publicly traded stock that they could use as currency to make acquisitions of other companies (like WhatsApp).

And though it seems a bit odd for some investors who are accustomed to stories of venture capital riches, being an investor in a private company doesn’t always mean you get a windfall even when the company does well enough to go public — that depends not just on whether the company turns out to be successful and on how early and at what valuation you invested, but also on whether public investors find the IPO and the valuation appealing… and lots of IPOs are not all that stupendously successful. The one stock in the Sharespost 100 fund that has IPOd recently, for example, is Sunrun (RUN) — Sharespost bought in with a very small investment that they valued at about $250,000 almost a year ago, and the stock went public with a fizzle recently and Sharespost’s shares today are worth… about $250,000.

The fund is an interesting way to get access to a market that is not completely correlated with the broader stock market, diversifying a bit into venture capital investments, and the fund actually outperformed the market over its first year (its only been around for about 18 months), but it’s expensive and illiquid and it’s not going to make anyone wealthy in the short term.

The Sharespost 100 Fund has a minimum initial investment of $2,500 if you buy directly from the fund (not sure why Robinson’s deal is for a $2,600 minimum), carries a maximum front load of 5.75% (less if you invest more, and possibly less if you invest through someone like Michael Robinson if they’re getting a deal for bringing new investors to the fund), and annual expenses are 1.9% — both are very high for a mutual fund, but venture capital investing is more expensive than public market investing. And it’s illiquid because they don’t offer daily redemptions — they offer to redeem up to 5% of outstanding shares each quarter, but you’d have to request your redemption by that quarterly date and hope that not more than 5% of other shares outstanding are submitted for redemption (if too many folks want to redeem, they pro-rate). They do at least operate at net asset value, so both purchases and redemptions are made at whatever they assess the NAV of the fund to be on that day — you don’t have to worry about premiums or discounts like you do with some investment funds.

So as with most pitches that are teased as fantastical generators of 200X returns, the hype and ridiculous promise is foolish and based on ridiculous logic (one hugely successful company made 2,000% returns for early investors, so maybe you can do the same thing by buying tiny slices of a few dozen pre-public companies!)… but underneath it all there is a real investment, which has been making a little bit of money and might help (the fund is just over a year old, so we’re really just guessing) to further diversify a portfolio (at a fairly hefty cost).

Millionaire maker? Probably not… but real, and interesting for those who like to dabble in the small and unusual and take substantial risks, and not nearly as risky as buying into small individual pre-IPO companies. As the new JOBS Act rules for crowdfunding of investments become more widely understood and these small equity offerings are made direct to consumers instead of through the stock market, things should loosen up more in the private markets — and I expect we’ll begin to see more of the newsletters pitch genuinely private investments as a way to differentiate themselves from the pack even as we also see new waves of scam artists taking advantage of the new “micro-IPO” markets — should be interesting times, don’t forget to hold tight to your wallet when walking through the carnival.

P.S. If you read the ad and are impressed by Robinson’s past efforts to get investors in early on pre-IPO investments because of his spiel about an earlier offer last year to let folks buy in to the “living metal” company — don’t be. About a year ago he was pitching a way to buy that stock, Stellar Biotech (KLH in Canada, SBOTF OTC in the US) before it got a Nasdaq listing, offering a special “prospectus” deal for “round lots” for something like $1 a share… the stock never got that NASDAQ uplisting (which he guaranteed would happen by November), and the stock has since fallen to about 50 cents. Which would be fine, people make mistakes and get investments wrong sometimes, I sure have made my share of errors — but it irks me that he’s using the “success” of that Stellar Biotech offering to claim his bona fides and impress new subscribers.


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47 Comments on "“Become one of 250 Partners in a VC Firm”"

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pauloyer
Member
2

Were you able to find a way to avoid the high front load? I don’t invest until I find a way around such front loads.

koifish46
Member
20

Wow ! Michael just never gives up trying to suck new investors into hi high priced news letter service. Last year he was highly hyped up on a micro cap biotech company, Stellar Biotech was going to make you a mint by June of this year. Funny someone forgot to tell Stellar. Their shares are only in the 50+ cent range. I personally wouldn’t touch a mutual fund at this time.

Rubokk
Guest
0
The guy solucited me also, a totally disabled veteran, i suffer with severe pain everyday. And every night. OK , so he didn’t know that about me. But just for the moment i thought this prtototype would be the answere to the biggest problems i have in my life. I am skeptical that the little black box does what has been said about it. VERY SKEPTICAL. This is the electronic version of snake oil. I say orove it and let ut stand a rugorous scientific review in an appropriate firum of medical experts before taking investors money. What us tobfear… Read more »
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359
fabian
Guest
0

Great article, thanks. I automatically delete these adds but it’s good to know why.

Sid Glassman
Guest
0

What about the bike ride?

jerry
Guest
0

It is also pretty interesting that the only way to get into the fund based on this ad is to subscribe to his newsletter at the cost of $3100……He does well with his other newsletters but the cost of this one is outa sight. I did call the company to look into it but was turned off by this added cost. I would rather just put $5000 into the fund.

Lawrence
Guest
0

I subscribe to the MoneyMorning. I read the lengthy article and what hit me right off the bat is — Why would a billionaire VC want or need $250 x $2700=$675,000?
250 ‘subscribers’ pay $2700 each. Ridiculous to say the least, IMO.

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372
franklyn
Guest
0
thank you Travis for your suggestions, I did receive Mike email but I know better, I still remember some of his recommendations that did not go anywhere , so you guys be careful do some research and do not pay the $$$$$$$$$$$$$fee , I bought the klh shares last year in Toronto where I live, and posted in this column that those shares were available , anyway I made a couple of hundred bucks and dumped them quickly , I guess I was a lucky one, anyway do your home work with those mentioned companies that suppose to ipo in… Read more »
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cyberguy
Member
10

I almost got roped into this one, but decided to do some research and found some articles (some from the Gumshoe) which steered me away from a poor investment!
Thanks, Travis, for your research and explaining the scheme, your members should be proud of the service you provide.

sheldon
Irregular
236

Tzvi, this website is the only one I recommend to friends. Travis has saved me maybe 613 times !

GERALD
Guest
0

iF I WERE INTERESTED IN BUYING INTO THIS FUND, I’D RATHER INVEST THE $6500 IN THE FUND AND GET A LARGER RETURN . I SEE THEY COULD NOT GET ALL 250 SUBSCRIBERS AND ARE STILL PUSHING THEIR QUEST FOR FOOLS WHO HAVE NO BUSINESS BEING NEAR THE MARKET.

takeprofits
Guest
0

If it sounds too good to be true, it probably is. Michael Robinson like Kent Moors is a real genuine “blowhard” and while they have some interesting ideas at times, you want to be very careful before considering investments in their “story” stocks for which they charge astronomical fees. In some ways I am glad i do not have large amounts of capital so I am not tempted to invest thousands just for information leaving me little tactually invest with.
Slow and simple ultimately wins the race.

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woodhujr
Member
4

Thanks I found this helpful. I subscribe to these services to help invest my retirement money but is very difficult to find a trustworthy source. All I know to do is keep reading and trying. Keep the good information coming.

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1209
onebiglake
Irregular
11
This is statistical investing hopefully with some analysis to assure you aren’t investing in a dog. The average results are that for every 12 companies you invest in, the lower third lose most of your money, the middle 3rd break even or do ok, and you hope the upper third get more than 100% gains to get you ahead. To have a degree of control in the companies (to have some impact on risk and to justify the expense of doing the research) you need to invest several millions in each company. I work in this area and going public… Read more »
Ken
Member
1

I would caution anyone considering Stellar Biotech SBOTF to check them out on Seeking Alpha. They think it is a con and I sold mine.

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3551
T Mann
Guest
0

Is SWIR still good?

Annalee Elman
Guest
0
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jdbaker
Irregular
2
Re: “Sharespost 100 Fund has a minimum initial investment of $2,500 if you buy directly from the fund (not sure why Robinson’s deal is for a $2,600 minimum), carries a maximum front load of 5.75% (less if you invest more, and possibly less if you invest through someone like Michael Robinson if they’re getting a deal for bringing new investors to the fund), and annual expenses are 1.9%”… ——————– 1. $2600 figure (from Robinson) covers 4% front load (i.e., $100 on $2500 minimum fund purchase) vs. max 5.75% ($143.75 on $2500). Note: per current prospectus, flat 4% (i.e., 4.00%) Dealer… Read more »
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wterry5084
Irregular
0

SharesPost 100 is working with quite a few excellent pre-IPO companies: Drop Box, JawBone, and Alien Vault to name three. The plan to eventually have investments in 100 companies. They are a closed-end fund, designed for long term investments.

SharesPost 100 is open to anyone for a minimum initial investment. SharesPost has other large money venture capital investors that invest outside the SharesPost 100 fund.

I believe Money Map offers a somewhat reduced fee for investment, but does not eliminate it.

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wonderphil
Irregular
25

If you want to invest in a fund of pre ipo companies you can do as I did and invest in fee free.
https://www.seedinvest.com/fund
There are several other companies which raise money for companies that also have similar funds as the above but as far as I know, they all charge what I consider high fees on the front end, back end or both.
https://angel.co/funds.

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A.M. Deist
Guest
0

When a firm gets secondary financing it doesn’t increase the value of stock for those who have financial interest in the company. If anything, it decreases the value. No one give money in a secondary financing and gets nothing in return.

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5971
inov8
Member
0

Most of the large Venture Capital investors are saying that valuation are outrageous (every firm is pitching themselves as being a unicorn, and are screwing the investors on the exit).
I would think that Sharepost 100’s best message is that they have a bunch of pre-crazy-valuation investments in the fund, and we arent buying unicorns now.. but my bet is that they are buying unicorns and are over paying.
Interesting idea, but I like to have better transparency on my money.

phil jones
Guest
0

There’s a closed end fund that’s something like a venture fund. SVVC. Sells at a big discount.

http://www.firsthandtvf.com/index.php?

Percy Gradowski
Guest
0

M bius Partners, one of the fastest growing IT solutions providers in the southwest, today announced that it has been named to The Channel Company s CRN Tech Elite 250. Monday, September 29, 2014 M bius Partners, one of the fastest growing IT solutions providers in the southwest, today announced that it has become a Premier partner in the VMware Partner Network.

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847
Dick Williams
Guest
0
The PRIVX fund can also be purchased thru TDAmeritrade. I did a “what if” up to the point of executing and set up a BUY for the symbol PRIVX. The sidebar shows the $2500 minimum and sale charge of 5.something percent. Can also be purchased thru the company website as mentioned. Chart against the DOW for five year looks good for all periods greater than one month and especially so at 2, 5 and 10 years. Less so vs NASDAQ but still favorable for PRIVX at the longer time periods. I am not a shareholder.
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donm
Irregular
1

Well, that 612 times you saved me.

Glenn Lee
Guest
0

i’m intrested in this technology can i get more info. what is the name of this company?Please reply!!!

Gr8Full!
Member
11336

Hi Glenn Lee, One of the great aspects of StockGumShoe.com is Travis alwayz reveals the Equity in question and by joining as an Irregular member, for a mere 13 1/2 cents per day, you get the short version, analysis and camaraderie that is second to none on the Plant 🙂 Best2AYou-Ben p.s. In this tease (tread) – Sharespost 100 Fund (PRIVX)

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TonyS.
Guest
0

Thanks, Great job. They lie, so good.

who noze
Guest
0

i actually was considering buying into he fund travis u made my day money map goup as bad as bll bonners newslertters

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605
Normally Dubious
Irregular
88
If you start to look at a Money Map presentation, sometimes you will get a follow up text version of the presentation from a John Wilkinson there…which I almost count on now; that way i can go right to the end quickly and see what is actually being pitched and the cost, and then I come over here to look up phrases like “Radical Technology Profits”. another note about MMP…they have some kind of “everything package”. When i signed up for something or other, after taking my initial payment, they then gave me this presentation about the everything (I forget… Read more »
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Jack
Guest
0

I did the SharesPost100 minimal investment of $2500 back about 14 Months ago, the market itself has increased by 25% close there bouts, but my $2500 less the upfront fee has done nothing which I find extremely frustrating…Not sure once the account was funded, was I suppose to do anything…

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