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Asset Strategy

What is secondary VC investing?​

Venture investing is the process of purchasing equity in high-growth startups. These companies are privately held, and these investments are used to fuel growth for new technologies with great potential.

Fission identifies the most promising ventures and purchases their equity in the secondary market from existing holders of the stock, such as Employees, Executives, and Founders, or Venture Capital firms. We seek companies in 1) high-growth industries, with 2) differentiated technology and products, and 3) high revenue and profit growth potential.

The Basic Process​

The process of secondary venture investing can be summarized in four key steps:

  1. Identify the universe of investible ventures
  2. Conduct diligence on potential investments
  3. Execute the acquisition of shares in the secondary market
  4. Continually monitor and value the portfolio

Let's dive into each.

Identify the universe of investible ventures: We leverage our unique relationships and proprietary data from industry-leading partners to find all the possible ventures that could potentially be invested in via the secondary market.

Conduct diligence on potential investments: Our in-house dedicated research team, with years of experience and access to proprietary information, dives deep into the most promising candidates, and we prepare to underwrite acquisitions of shares in those companies. We are supported by institutional investor partners that specialize in the acquisition and valuation of these private venture assets.

Execute the acquisition of shares in the secondary market: We work with the companies via brokers to acquire their shares. This process can take 1-3 months.

Continually monitor and value the portfolio: We provide daily estimates as to the current net asset value (NAV) of the portfolio and each stake it holds and make this available to our users. This formal NAV is calculated by a Fund Administrator based on valuation data provided by 3rd party data providers. These data providers collect pricing information from the private markets based on recent institutional secondary transaction prices, fund marks, company valuation data such as 409As, and more.

Return and Risk​

Whether it was astronomically high APYs via liquidity mining or speculating on ICOs, investors in crypto have often chased high returns. However, as we have come to see since the start of 2022, insufficient attention has been paid to the potential risk of such investments. While this was perhaps understandable in the early days of the industry, as it matures and more sophisticated players enter, an additional focus on risk—and risk management—is needed.

For these reasons our tokens are explicitly focused on real-world venture equity and are backed by transparent technology and legal structure. While these investments do carry a higher risk than US public equities, we only invest in established late-stage ventures (Series C or later) where failure rates are substantially lower than Seed through Series B ventures.

In the aggregate, the late-stage ventures we target have consistently returned above the S&P 500.

However, it is important to understand that venture assets are HIGH-RISK assets that may result in investor losses. Investors must understand their investment objectives before investing.

Risk Metrics​

We employ a variety of strategies to reduce the risk of our tokens.

  1. Portfolio concentration: We do not allocate more than 20% of any fund to a single asset.

  2. Sub-sector diversification: Within each fund, we do not allocate more than 40% of the fund to any sub-sector.

  3. Correlation analysis and back testing: We perform a quantitative analysis of our portfolios for internal correlation and correlation to public market comps. We seek to avoid a high correlation between portfolio companies to provide diversified exposure and stabilize returns.