The Fund's Investment Thesis
AVG’s Emerging Markets Fund will offer investors a way to further diversify their portfolio: through geography. The fund will invest in ~20-30 companies headquartered outside of the major U.S. venture capital hubs — Silicon Valley, NYC, Boston — or are based/largely doing business internationally.
While the first 50 years of innovation were confined to a few U.S. hubs, we believe the next 50 will be different. We’ll see more great companies built in Seattle, Austin, Salt Lake City, and St. Louis, for example — as well as in places like Tel Aviv, Vancouver, Bangalore, and Santiago. The Covid pandemic appears to have accelerated this dispersion by five or ten years as talent and capital flows are less geographically tied down, and as more venture investors embrace a digital due diligence process.
AVG is in an excellent position to identify, access, and create a portfolio of such venture opportunities. We invest in 200+ venture deals per year, all led by established venture capital firms or syndicates. With alumni connections to some of the country’s top universities — as well as established accelerators, incubators, and venture firms — we can draw on one of society’s most powerful networks. Besides leveraging our community to source new opportunities, there could also be an opportunity to invest in follow-on rounds of some of the ~600 companies already in the AVG portfolio if they meet our Emerging Markets Fund criteria. It’s important to note that AVG rigorously evaluates each opportunity by the same criteria in order to deliver promising portfolios to our investors.
Data Supporting Our Thesis
Acceleration of capital dispersion beyond Silicon Valley
- Researchers predict that less than 20% of VC deals will come from the Bay Area the near future. In 2020, the Bay Area saw one of the largest declines in completed angel and seed deals among the 10 most active venture hubs — realizing just 81.2% of its 2019 total.
- In contrast, here are just a few stats on up-and-coming venture hubs. Atlanta saw a 13.1% increase year over year in 2020 it terms of closed angel and seed deals, nearing 100 completed deals. Austin was named the #1 place in the US to launch a business by CNBC, while the Kauffman Index ranked Miami as the second most entrepreneurial city in the US due to its startup density (Crowdspring).
- On PitchBook’s list of VC hotspots outside Silicon Valley, NYC, and Boston: Austin, Atlanta, LA, Seattle-Tacoma, DC/Baltimore/Arlington, Texas, Denver-Aurora, Chicago, and Philadelphia.
Major venture investing opportunities abroad
- About 60% of the world’s top startup ecosystems are located outside of North America, and these ecosystems continue to evolve and strengthen.
- The number of startup ecosystems that have produced a unicorn (private companies that have reached a $1B valuation) has exploded from 4 (2013) to 84 (2020).
- The Asian Pacific region’s ability to generate $1B startups is only second to North America.
- There are an estimated 30 million startups in China.
- Among the top 10 global startup ecosystems worldwide are Beijing (#4), Tel Aviv/Jerusalem (#6), Shanghai (#8), and Stockholm (#10).
Tech and lifestyle trends enabling and accelerating dispersion
- If investors continue to use teleconferencing software to source, diligence, and invest in nonlocal companies, a large amount of capital could be unlocked for businesses headquartered outside of traditional investment hubs.
- Blumberg noted that new tech hubs such as Miami, Austin, and Nashville will continue to spring up “supported by remote work flexibility, high cost of housing in traditional tech hubs, burdensome regulation and taxation, and lifestyle choices.”
Entrepreneurship continues despite pandemic
- As reported in a study conducted by the Stanford Business School, more than half the VCs in the study said their portfolio companies have either benefited or remained unaffected by the pandemic.
- According to the Wall St. Journal, “Americans are starting new businesses at the fastest rate in more than a decade — part of what economists call “creative destruction” when one economic system rises in the wake of the destruction of another.
- The GEM Global Report (2019/20) noted that 12 out of the 16 emerging economies tracked worldwide have experienced increased levels of early-stage entrepreneurial activity over the last 10 years, while 9 of these have also experienced increasing established business ownership.
Special Benefit: The Emerging Markets Venture Club & Syndicate
Every investor in the Emerging Markets Fund will automatically become a member of our Emerging Markets Venture Club. The Club offers the following benefits:
- Invest with a like-minded group of investors in venture deals
- Opportunity to opt into Emerging Markets Syndications. These single asset funds are designed to let you obtain additional exposure to portfolio company investments as you wish. All investments were led by an established VC and have been vetted and sponsored by an one of our actively managed funds. Syndication investment minimums are $10K minimum per deal, vs. $25K outside the Club.
- Ability to score potential investments and see how others in the club evaluate the opportunity
- Educational opportunities, informational updates, invitations to virtual events, and the option to personally support portfolio companies
- Updates on your fund and portfolio
- Syndication investing privileges for a year
| SAMPLE SYNDICATION
Producer of radioisotopes to diagnose and treat heart disease and cancer using a safer, cleaner, and more affordable means than nuclear reactors. Shine can supply about 1/3 of the global demand for a key medical isotope currently supplied from overseas. Based in Wisconsin. Co-investors: Fidelity Growth Funds |
| SAMPLE SYNDICATION
An app solving the huge and lucrative challenge of geolocation, when over 75% of the world’s population don’t have addresses. W3W converts latitude/longitude coordinates into unique and simple 3-word sequences. Based in UK. Co-investors include Daimler, Sony, Fraser McCombs, Intel Capital, SAIC Technologies |
NOW OPEN THROUGH JUNE 30, 2021
This fund will invest in ventures that are headquartered (or primarily serve markets) internationally or outside of the traditional venture capital hubs in the U.S.
- Promising portfolio company investments sourced, vetted, and sponsored by one of our actively managed investment teams
- Our Office of Investing determines if the opportunity meets our Emerging Markets Fund lens
- Backed by established venture investors with deep experience in the sector
- Companies headquartered outside of the traditional venture capital hubs of the U.S. or based/focused internationally: e.g. Tel Aviv, Bangalore, Santiago, Vancouver, etc.
- Offers investor diversification across sector, stage, geography, and lead investors
- Review the first investments that the fund has already made to see the type of deals we will be doing.
I'm interested in the Emerging Markets Fund
Smart, Simple Venture Investing
Open to All Accredited Investors
Smart
- Portfolio consists of ~20-30 companies, diversified by stage, sector, geography, and lead investor within the investment mandate
- Venture portfolio professionally managed by our experienced investment professionals
- Co-invest alongside established lead venture investors
Simple
- $25K minimum investment; $2M maximum investment
- Online signing process takes just minutes
- White-glove support from our Investor Relations team
How it Works
Data-driven and process-based investors
AVG Deal Sourcing and Diligence
- ~50 investment professionals sourcing deals; ~70 full-time staff in support
- Data-rich and process-based diligence and decision making with rigorous deal scoring
- Co-invest alongside established lead venture investors
AVG Investment Process
- Every deal sourced by one of our Alumni Funds is screened to determine if it fits within the Emerging Markets Fund investment mandate.
- AVG’s centralized investment team, led by our CIO and Office of Investing, selects investments from the potential deals to optimize diversification by stage, sector, geography, and lead investor.
- The portfolio will be constructed over a period of ~12-15 months and represent a mix of deals sourced and sponsored by our actively managed funds.
- Approximately ~20% will be reserved for follow-on investment opportunities.
Sample Deals for Emerging Markets Fund
Here are current AVG portfolio companies that exemplify the type of deals this fund would consider.
For sample purposes only.
Team
Below are the AVG investing team members on our Focused Fund Nomination Committee, who determine if deals invested in and nominated by our various AVG funds are a fit for the Emerging Markets Fund. In evaluating deals, the Committee considers fit with the fund thesis and portfolio diversity across sector, stage, and geography. The Committee roster changes quarterly but is by policy 60% diverse (i.e., nonwhite male).
