Over the last 50 years, venture as an asset class has become an important aspect of an investor’s overall portfolio. Institutional and retail investors alike (in the form of angels) have become active in the venture industry wanting to be a part of the high growth eco-system. Interestingly, the odds of success in the venture business are extremely low and the high fees haven’t deterred investors from continuing to allocate capital into the venture eco-system.
As the venture eco-system has evolved, so have the kind of businesses the venture industry has backed. What started off as investments into electronics, semi-conductors, technology has now moved into traditional brick and mortar businesses like coffee chains and shoe retailers. However, it’s important to understand that the economics of the latter do not lend itself into venture backed capital funding.
Certain businesses, though high growth is better off without venture capital. Growth cannot be manufactured, there are times when the playbook for growth is not clear post the event.
While many investors globally may not have heard of the footwear brand named HEYDUDE, the brand has had a phenomenal success in a short period of time with a full cash exit for the founder.
However, it’s important to understand that the footwear brand and retailing business has always gone through cycles, as can be seen from one of the most popular brands in the last decade going through a cyclical downturn alongside a change in management to rebrand their fortunes.
Understanding history and cycles will always make an investor appreciate the nuances and the economics of a business. More importantly, history gives a nuanced perspective to the cycles each business and sector that one needs to navigate through as an investor.