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Asset Management 101 For Founders

  • Published December 15, 2022 4:50AM UTC
  • Publisher Osama Hassan
  • Categories Capital Raising Tips

Understanding the basics of asset allocation, risk diversification and risk-reward trade offs can explain why VC funding dries up in tough market conditions ๐Ÿ’ก

You see … multi-billion dollar institutional funds sprinkle money in different asset classes to meet asset allocation and diversification demands ๐Ÿ’ฐ

Each asset class has risk associated with it and each offers different financial returns … 

Venture capital is actually a sub-asset class of private equity and falls under the alternative investment asset class, and for most LPs (the parties that fund VCs), it’s only a smaller fraction of the overall portfolio ๐Ÿ—’๏ธ

Because of risk-reward trade-offs not all asset classes are equal for investors, and because venture capital is the riskiest of them all, in trying times they will shift the allocation of their capital to reduce risk. 

To make more informed decisions, essential knowledge of foundational financial concepts can really help founders better understand the economic factors behind the surplus and deficit of capital in markets ๐Ÿš€๐Ÿš€๐Ÿš€

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