Career Musings, Part II

So, full disclosure, I've been thinking about three different work possibilities at which to direct my energies:

1. Raising an early-stage fund (I already discussed this)
2. Building an alternatives trading business at a Wall Street firm
3. Running a hedge fund (someone else's hedge fund)

These avenues are pretty cool. And I have, in fact, thought about trying to combine VC, hedge fund management and trading gigs. But I haven't really thought about trying to combine them in a new fund structure, one that is a hybrid between a liquid-markets hedge fund and an early-stage investment fund. Why? Because they typically attract different classes of investors. But I've been thinking today, that...

It actually makes abundant sense and, in fact, reflects the way I think about investing. Large, liquid companies are being disrupted by new technologies and business models all the time, which effects their earnings prospects, growth trajectory and market positioning. And who does the disruption? Frequently it's early stage companies. I learn a tremendous amount through my early-stage investing activities that informs my liquid-markets investment outlook. Further, observations about what is going on with large public companies can often point to areas where new innovation is needed or where existing early-stage companies can be plugged in to solve problems. So by running a book that allows for both early-stage and liquid-markets investing, one can create a virtuous cycle of learning and information that can be monetized. In effect, creating a situation where information arbitrage is at play. This, of course, is my holy grail.

So I am going to spend some calories thinking about this idea more concretely. Thanks to those who have written me with their ideas. I appreciate it. Feel free to ping me with additional thoughts and perspectives as well.

Comments

[Jason Wood]

Roger,

Intellectually I'm enamored by the potential of hybrid investment vehicles; which as you know is how I first came to appreciate your blog back in its beginnings when you mused about such things with frequency.

I refused to believe it can't be done, and done well. That said, from personal experience I know how hard it can be to accomplish, and particularly how difficult it is to raise institutional money under the auspice of doing them all simultaneously.

Have you taken a look at the returns generated by CrossLink or Integral? They've been singing the praises of hybrid investment paradigms for years.

Best,

Jason

[Hao]

Roger - it sounds like a really interesting idea. Will you also need a summer intern if you are starting this fund? Let me know.
Good luck.

[Chris]

If you find any merit in Nassim Taleb's black swan theory, this might also make sense from a performance and volatility standpoint.

Combining an early stage venture capital firm that takes on dozens of smaller bets allows you to place controlled risk in a number of different places.
The hedge fund component might be considered a counter strategy, where you are exposed to 'tail' downside events.

Thinking of it in terms of combining Taleb and Victor Niederhoffer strategies.

Am I making sense?

[Nihalf]

The idea sounds intriguing. But on a day to day basis, HF style trading anf early VC investments seem to require different skill sets - still, as Yaser mentioned, with the right people and the right strategy it could be very successful.

Let me know if you're hiring too :-)

[Yaser Anwar]

Hedge Fund + Venture Capital would be an excellent model indeed. One short-term and the other long-term oriented (on average) would make a great fit with the right people and implementation.

Wish you the best.

[PRoales]

Are you channeling Paul Kedrosky? You both blogged on a "hybrid between a liquid-markets hedge fund and an early-stage investment fund." play at almost the same time...

[Chris]

Roger- let me know if you're hiring :)