Within Five Years, Most VCs will have a Partner Focused on Electronic Trading

Mar 4, 2013 • Paul Singh

Traditionally, venture capital firms  raise a pile of money and then have specific partners responsible for the deployment of that cash into specific industry and regions. Over the next few years, that behavior will adapt to the increasing amount of online trading available in the private markets.At smaller funds (or funds focused on early stage opportunities), this partner will likely focus on helping their portfolio companies raise more follow-on money from other online investors. At larger funds, this partner will likely place small investments into a larger number of companies (which they were already doing via scouts over the past few years anyways). In other words, this partner will likely focus on the buy-side of the transaction.

Regardless of fund size, this partner will also be responsible for managing the sell-side of the transaction as well. As more investors become comfortable buying online (especially after crowdfunding becomes a reality), we’ll likely see firms liquidate portions of their holdings as well — also via online trading.

This shouldn’t come as a surprise, the public markets have been doing it for years and, depending on which reports you believe, nearly 75% of daily public market trading volumes are completed entirely online.

Regardless of whether you’re a founder raising money or an angel/VC investing money, keep a close eye on AngelList’s Invest Online feature — they’re quickly becoming the NASDAQ of the private markets and it’s only a matter of time before investors begin to adapt.