Timing can be everything, and a new venture capital fund marketed to the masses is finding that the calendar is not its friend.
MeVC, a $330-million fund for individual investors started by Redwood City, Calif.-based Draper Fisher Jurvetson, fell in its first day of trading on the New York Stock Exchange on Monday.
The fund (full name: MeVC Draper Fisher Jurvetson Fund I), a so-called closed-end fund trading under the ticker symbol MVC, opened at $20 a share, the price at which it was sold to investors in spring. But by the end of trading the price had fallen to $19.25.
Still, the shares stayed above the fund's stated net asset value of $19.04 a share.
MeVC has announced investments of $75.5 million in nine Internet start-ups in the last month and aims to use the capital it has raised to invest in a total of 30 to 50 firms within two years.
But the slump in Internet shares and shift in investor attitudes toward start-ups during the last three months appear to have curbed demand for MeVC shares.
Other Internet incubators have been hit hard in recent months, including CMGI Inc. (CMGI), which at $45.25 as of Monday is down dramatically from a 52-week high of $163.50.
The MeVC fund in March sold 16.5 million shares to investors at $20 apiece. It's the first in a planned family of venture funds from Draper aimed at letting small investors participate in private equity investments. "The whole idea is to take the asset class to individuals, allowing them to do what professional investors have been able to do for 40 years," fund manager John Grillos said.
But venture capital is a high-risk business. Indeed, individuals should consider the MeVC fund a long-term, risky purchase, said Timothy Draper, managing partner of Draper Fisher.
"Invest what you think you can lose," Draper said. And if the fund does ultimately provide a return, "think of it as your birthday."
MeVC is managed by MeVC Advisers Inc., which charges a 2.5% annual management fee and will take 20% of stock profits.
"That's the low end of what venture firms charge their own limited partners," Grillos said. The level of compensation is appropriate, he said, because "we're looking at the future of companies that are so new it's hard to tell their future."
Grillos is a former managing director responsible for information technology investments at Robertson, Stephens & Co., a San Francisco investment bank.
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Paving a Bumpy Road for MeVC
Shares of CMGI, one of the best-known Internet-company incubators, have fallen sharply from their highs--one reason new venture-investing fund MeVC got a relatively poor reception when it began trading Monday. CMGI shares, weekly closes and latest on Nasdaq (ticker symbol: CMGI):
Source: Bloomberg News