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The new math: why seed investors are selling their winners earlier
The new math: why seed investors are selling their winners earlier

TechCrunch

time3 hours ago

  • Business
  • TechCrunch

The new math: why seed investors are selling their winners earlier

Charles Hudson had just closed his fifth fund several months ago – $66 million for Precursor Ventures – when one of his limited partners asked him to run an exercise. What would have happened, the LP wondered, if Hudson had sold all his portfolio companies at Series A? What about Series B? Or Series C? The question wasn't academic. After two decades in venture capital, Hudson has been watching the math of seed investing change, maybe permanently. LPs who've previously been patient with seven-to-eight-year hold periods are suddenly asking questions about interim liquidity. 'Seven or eight years feels like a really long time' to LPs right now, says Hudson, even though 'it's always been seven or eight years.' The reason: a steady stream of venture returns in recent years — returns that made long hold periods acceptable — has largely dried up. Coupled with the availability of other, more liquid investment options, many backers of very early-stage VC are demanding a new approach. The analysis his LP requested revealed an uncomfortable truth, says Hudson. Selling everything at the Series A stage didn't work; the compounding effect of staying in the best companies outweighed any benefits from cutting losses early. But Series B was different. 'You could have a north of 3x fund if you sold everything at the B,' Hudson discovered. 'And I'm like, 'Well, that's pretty good.'' Beyond pretty good, that realization is reshaping how Hudson thinks about portfolio management in 2025. Though now a veteran investor – Hudson has spent 22 years in VC between Precursor, an eight-year run at Uncork Capital and another four years at In-Q-Tel earlier in his career – he says investors in very young companies are being forced to think like private equity managers, optimizing for cash returns alongside the home runs that, if they're lucky, define their careers. It's not an easy mental change to make. 'The companies where there's the most secondary interest are also the set of companies where I have the greatest expectations for the future,' says Hudson. It's not just Hudson; his thinking about secondary sales reflects broader pressures reshaping the venture ecosystem. Hans Swildens is the founder of Industry Ventures, a San Francisco-based fund of funds and direct investment firm with stakes in 700 venture firms, told Techrunch in April that venture funds are 'starting to get savvier about what they need to do to generate liquidity.' He's seeing venture funds hire full-time staff members specifically to pursue alternative liquidity options, with some seed managers dedicating months to 'manufacturing liquidity from their funds.' Though this reshuffling of priorities extends far beyond any single fund, the pressure is particularly acute for smaller funds like Precursor, a traditional seed-stage fund that prides itself on backing unconventional founders like Laura Modi of ByHeart baby formula (a solo founder in a regulated industry with no prior experience) and Doktor Gerson of Rad AI (whose previous startup had failed). While firms with mega-funds like Sequoia and General Catalyst can afford to wait for $25 billion outcomes, smaller funds need to be more tactical about when and how they harvest returns. Perhaps nowhere is the shift more visible than in Hudson's relationships with limited partners. University endowments, once the most coveted LPs in venture, are now grappling with unforeseen challenges from the Trump administration. Harvard, of course, is the poster child here, with federal investigations into its admissions practices, threats to research funding tied to compliance issues, and ongoing scrutiny of its substantial endowment amid calls for universities to increase their annual spending requirements or face taxation. Hudson says that based on his conversations with LPs inside these organizations, they've never believed more in the power of venture, yet they've also never felt more hesitant about making 10- to 15-year illiquid commitments. The result is a more complex LP base with competing needs. Some want 'as much money back as soon as possible, even if that's a suboptimal outcome in the long term,' says Hudson. Others prefer that Hudson 'hold everything to maturity, because that's what's going to maximize my returns.' Navigating these demands requires the kind of portfolio management sophistication that seed investors haven't traditionally needed, which Hudson views with some ambivalence. Venture, he says, is starting to feel a lot less like an art and something that 'feels a lot more like some of these other sub-asset classes in finance.' Hudson isn't without hope, he adds, but he is clear-eyed about what's changing on the ground, as well as the opportunities those changes create. As funds grow larger and deploy more capital, they're becoming necessarily more algorithmic, looking for 'companies in these categories, with founders from these schools with these academic backgrounds who worked at these companies,' he says. The approach works for deploying large amounts of capital efficiently, but it misses the 'weird and wonderful' companies that have defined Hudson's best returns and kept Precursor in the game. 'If you're going to hire people just off a resume screener tool,' he says, 'you're going to miss people who maybe have really relevant experiences that the algorithm doesn't catch.' You can hear our full interview with Hudson via TechCrunch's StrictlyVC Download podcast. New episodes come out every Tuesday.

2 Vanguard ETFs That Can Turn $300 per Month Into Over $1 Million
2 Vanguard ETFs That Can Turn $300 per Month Into Over $1 Million

Globe and Mail

time10 hours ago

  • Business
  • Globe and Mail

2 Vanguard ETFs That Can Turn $300 per Month Into Over $1 Million

Investing a regular amount of money into the stock market each month can be an excellent way to grow your savings and build up a portfolio that's eventually worth $1 million or more. But it can be challenging to do, especially since you have to ensure you can continue to afford making monthly investments, and then picking which investments to make with that money. Amid volatile economic conditions, that's no easy task. You can, however, simplify the process by going with some solid exchange-traded funds (ETFs) that can diversify your portfolio and set you up for some great growth opportunities in the future. A couple of low-cost Vanguard ETFs to consider for this purpose include the Vanguard Growth Index Fund (NYSEMKT: VUG) and the Vanguard Information Technology Index Fund (NYSEMKT: VGT). Where to invest $1,000 right now? Our analyst team just revealed what they believe are the 10 best stocks to buy right now. Continue » Here's why investing $300 per month into either one of these ETFs could put you on track to generating a $1 million portfolio in the future. Vanguard Growth Index Fund The Vanguard Growth Index Fund is a great, growth-focused ETF you can add to your portfolio. It charges an expense ratio of only 0.04%, which means you don't have to worry about high fees chipping away at your gains. What's attractive about this fund is that it focuses on large-cap growth stocks. These are the types of investments that can drive long-run returns for your portfolio and make the most of your money. Stocks such as Tesla, Amazon, and Nvidia are all among its top-10 holdings. These are leaders within their respective industries, and their businesses are synonymous with growth. With more than 160 stocks in total, this is a well-diversified ETF to simply buy and hold. It also yields around 0.5%. Over the past decade, the ETF has achieved total returns (which include dividend payments) of approximately 327%. That averages out to a compound annual growth rate (CAGR) of 15.6%. But for the sake of being conservative, let's assume that its returns will slow down given how hot the market has been in the past few years and how it's reaching record levels. If the ETF averages a return of about 10% for the very long haul (which is in line with the S&P 500 's long-term average), then a $300 per-month investment could grow to more than $1 million after a period of 34 years. This would require investing in the ETF every month during that time frame. But by doing so, you can put yourself on a path to producing some fantastic returns thanks to the effects of compounding. VUG Total Return Level data by YCharts. Vanguard Information Technology Index Fund As terrific of a growth investment as the Vanguard Growth Index Fund has been in recent years, it still falls well short of the gains the Vanguard Information Technology Index Fund has produced during that stretch. At 543%, its 10-year total returns average out to an annual gain of 20.5%. That's a mind-boggling return, and it highlights just how impressive the stocks within this ETF have been. There will be some overlap between this fund and the growth ETF, but the big difference is there is heavier exposure to big tech. Nvidia, Microsoft, and Apple account for a combined 45% of the Vanguard Information Technology ETF's total holdings, but they make up just around 32% of the growth ETF. That difference can be substantial over time, especially given how well a massive stock like Nvidia has performed. In 10 years, its returns have been truly exceptional, totaling 28,000%. Given Nvidia's size today as one of the most valuable companies in the world, odds are its returns will be far more modest over the next decade. While they may still be great, it's probably a good idea to factor in a healthy dose of conservatism with this ETF as well given how much of a boost Nvidia has given it in the past. Even though the ETF is focused on tech and growth, averaging 20% annual returns likely isn't going to be sustainable over the very long haul. The expectation of a 10% return may also be prudent with this ETF to ensure your expectations aren't set too high for future gains. As with the growth ETF, if you invest $300 per month into this fund, you can also be on the path to a $1 million portfolio. If this ETF continues to outperform the market, however, then it may take less than 34 years to get to $1 million. But by staying the course and investing regularly into this or the growth ETF, you can be in a good position for building up a solid portfolio over the long haul. The Vanguard Information Technology ETF charges an expense ratio of 0.09%, and while that's a bit higher than the growth ETF's fees, they aren't going to drastically alter your prospects for generating potentially life-changing returns from regularly investing in this fund. Should you invest $1,000 in Vanguard Index Funds - Vanguard Growth ETF right now? Before you buy stock in Vanguard Index Funds - Vanguard Growth ETF, consider this: The Motley Fool Stock Advisor analyst team just identified what they believe are the 10 best stocks for investors to buy now… and Vanguard Index Funds - Vanguard Growth ETF wasn't one of them. The 10 stocks that made the cut could produce monster returns in the coming years. Consider when Netflix made this list on December 17, 2004... if you invested $1,000 at the time of our recommendation, you'd have $659,171!* Or when Nvidia made this list on April 15, 2005... if you invested $1,000 at the time of our recommendation, you'd have $891,722!* Now, it's worth noting Stock Advisor 's total average return is995% — a market-crushing outperformance compared to172%for the S&P 500. Don't miss out on the latest top 10 list, available when you join Stock Advisor. See the 10 stocks » *Stock Advisor returns as of June 9, 2025 John Mackey, former CEO of Whole Foods Market, an Amazon subsidiary, is a member of The Motley Fool's board of directors. David Jagielski has no position in any of the stocks mentioned. The Motley Fool has positions in and recommends Amazon, Apple, Microsoft, Nvidia, Tesla, and Vanguard Index Funds-Vanguard Growth ETF. The Motley Fool recommends the following options: long January 2026 $395 calls on Microsoft and short January 2026 $405 calls on Microsoft. The Motley Fool has a disclosure policy.

Why Bank of America (BAC) is a Top Stock for the Long-Term
Why Bank of America (BAC) is a Top Stock for the Long-Term

Yahoo

timea day ago

  • Business
  • Yahoo

Why Bank of America (BAC) is a Top Stock for the Long-Term

Building an investment portfolio from scratch can be difficult, especially if you're new to investing. It's easy to feel overwhelmed with so many different investment options out there, but focusing on stocks that are set to outperform the market over the next 12 months is an excellent place to start. Now, let's break down why adding this one exceptional stock, highlighted below, to your portfolio could be a recipe for success. Headquartered in Charlotte, NC, Bank of America Corporation (incorporated in 1874) is one of the largest financial holding companies in the United States. With total assets worth $3.35 trillion as of March 31, 2025, it provides a diverse range of banking and non-banking financial services and products through 3,681 financial centers and 14,866 automated telling machines (ATMs) across the country. Since being added to the Zacks Focus List on January 9, 2017 at $22.68 per share, shares of BAC have increased 98.68% to $45.06. For fiscal 2025, three analysts revised their earnings estimate upwards in the last 60 days, and the Zacks Consensus Estimate has increased $0.02 to $3.68. BAC boasts an average earnings surprise of 6.6%. Earnings for Bank of America's are forecasted to see growth of 12.2% for the current fiscal year as well. Because stock prices react to revisions, buying stocks with rising earnings estimates can be very profitable. Focus List stocks like BAC offer investors a great opportunity to get into a company whose future earnings estimates will be raised, potentially leading to price momentum. Want the latest recommendations from Zacks Investment Research? Today, you can download 7 Best Stocks for the Next 30 Days. Click to get this free report Bank of America Corporation (BAC) : Free Stock Analysis Report This article originally published on Zacks Investment Research ( Zacks Investment Research

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