Emerging Markets Fund FAQs
April 15, 2021 | Ashley Brindamour
For this edition of Venture Beyond the Valley, we wanted to explore some of the questions we’ve heard about the Emerging Markets Fund.
What will an Emerging Markets Fund portfolio invest in and look like?
The Emerging Markets Fund (EMF) invests in companies that are located in an emerging U.S. or international market for venture capital investments. The portfolio will contain ~20-30 venture deals, further diversified by sector, stage, and lead investor. All will have established leads and be vetted and sponsored by one of AVG’s actively managed funds.
What are the requirements for investors?
You must be an accredited investor. The investment minimum is $25K.
What’s the investing thesis?
The thesis of EMF is that while the past 50 years of venture investing have been largely dominated by three key venture hubs in the U.S. — California, New York, and Boston — arguably the future will be different. We envision a much more diffuse market within the U.S. and globally, offering access to innovative companies at more attractive valuations. Here are some of the reasons we think emerging markets are attractive investing opportunities.
- Late-mover advantage: Investors and entrepreneurs can leverage the learnings of more well-established peers and technology.
- Growing supply and demand: Investing in emerging markets is also investing in countries where there is increasing strength in both entrepreneurial and consumer segments.
- Greater diversification: AVG is a strong proponent of portfolio diversification as a risk mitigation strategy, and seeking opportunities in new markets is another way to diversify.
- Regional outlook: Ambitious startups in emerging countries often start with a bigger scope, considering cross-border opportunities.
- Valuation “discount”: Emerging markets often offer a chance to invest in promising ventures at better prices than in markets where venture is more concentrated.
What locations will you be targeting?
We don’t have a quota, but we expect about 50% of the deals will be from international markets and 50% from emerging U.S. markets. Deals will not be located in Silicon Valley, N.Y.C., or Boston. We will diversify both within the U.S. market and internationally. Since our practice is to follow established lead investors with expertise in a sector or geography, both the lead and our own teams will evaluate any risks involved in investing in a region.
How do you define an international deal?
We consider a deal international if a company is based outside the U.S. or if their core market is international.
How will AVG locate and vet international deals?
Alumni Ventures is already locating and vetting international deals—in fact, we’ve done so since our very first fund. We rely on our team of ~50 investment professionals and ~550K community members and subscribers to help identify opportunities. To vet, we leverage the due diligence of the established investor leading the deal, then do our own diligence, including speaking to the CEO and generally the lead investor. Typically, the lead investor has experience in the region and sector.
How are the investments for the portfolio selected?
All investments start with an AVG actively managed fund. Once an AVG sponsor fund has approved and committed to a deal—which meets our criteria for acceptable risk-reward—that fund can propose the deal for the Emerging Markets Fund if it seems a good candidate. Our 7-member Focused Fund Nomination Committee then decides if the investment is a good fit with the fund thesis and if adds to portfolio diversification across stage, sector, geography, and lead investor.
What type of deals might be featured in the portfolio?
Please explore our fund materials to find Case Studies of AVG emerging market past deals that we have invested in — including some that have already been added to the EMF portfolio.
Do you have any reserves?
Yes, we reserve ~20% of the fund for follow-on rounds to invest in the most promising of the EMF portfolio.
What is the EMF Venture Club?
Every Emerging Markets Fund investor has a one-year membership to our EMF Venture Clubs. The club is staged in a private online platform offered by AVG and provides members a chance to learn about venture, receive fund and portfolio news updates, and evaluate investments. The club offers 5-8 single asset fund investment opportunities (Syndications) where investors can gain exposure to a portfolio company in which the AVG Funds are investing. You evaluate the deal and you decide if you want to increase your investment in this portfolio company. All deals are vetted and approved by an AVG fund and offered when we have negotiated extra allocation from the portfolio company.