Que Ventures seeks to provide capital and services to micro-entrepreneurs. To facilitate the Que Ventures vision, it is critical to prudently invest and manage the capital of the firm. The underlying thesis starts with the existing internet infrastructure. The expansion of the internet created the foundation for transforming the economy. As the internet continues to evolve, Que Ventures believes there are overlooked opportunities that are ripe for investment.
What is the foundation?
- Social Platforms
The thesis is based on opportunistic approaches to the existing internet infrastructure. As the internet infrastructure continues to evolve, the foundation may or may not include the sectors above and will change over time.
Que Ventures believes that investments based on a risk parity approach is a unique perspective in the crowded financial landscape. Risk parity means investing equal amount of capital in each type of investment based on the risk assessment. The risk assessment of each asset category is based on proprietary methodology routed in generally accepted risk ratios. The risk ratios at the base of the methodology are the sharpe ratio, meshed with quality and value tilts.
- Existing Public Tech securities (Tech Infrastructure)
- New Business (Micro-Entrepreneurs)
- Emerging Public Tech securities (Public VC Exposure)
- SME Debt (Main Street Fixed Income)
During the initial internet build (1980s to 1990s), the infrastructure to connect the world electronically was established. Venture capitalists looked to back these companies that now own the pipes that unite the world. These companies are now developed public companies that continue to reap the benefits of the internet evolution. Que Ventures believes public securities that own intellectual property provide stable investment returns as the companies mature and return capital to shareholders.
The investment thesis originates with the existing foundation for economic development (i.e., mature internet). The pipes are laid and the vast majority of the US (and continually expands in the developing world) have access to the internet (fixed (28%) or mobile (74%) broadband access). Que Ventures believes the difference between the late 90s technology wave and the late 2010s technology wave is rooted in acceptance and comfort. The American population understands the internet and how the internet benefits an individual.
Through continued use of the internet over the last 15 years, there is growing trust in internet commerce. Que Ventures acknowledges as the internet evolves there will be continued issues, such as privacy concerns, most notably the Edward Snowden leak in 2013 and credit card security breaches throughout 2014). However, Que Ventures believes there is more good and seeks to invest in emerging opportunities.
The emergence of online marketplaces created a new income opportunity for the mass consumer. For example, Amazon and eBay provided an outlet for local shops to sell nationally or globally. Prior to Amazon and eBay, the local bookstore had a limited market of potential customers based on its geographic reach. The local bookstore can now leverage the marketplace (which relies on networking and telecommunications equipment to connect to the local bookstore) at low-cost and increase distribution exponentially. The local storekeeper in Montana can sell to a consumer in South Carolina. Que Ventures believes this concept will continue to expand into other sectors. Advisors can communicate in-person through Skype, Google Hangouts, FaceTime and provide face-to-face conferencing.
The traditional Venture Capital (“VC”) industry will continue to invest in the marketplaces and platforms, which the local market will continue to access to support their business. Que Ventures understands this perspective and can still take advantage in a risk adjusted manner.
Que Ventures plans to leverage the experience and expertise of the VC community to continue to invest and support the startup community. For Que Ventures to succeed, then the foundation needs to remain strong and continue to expand into new sectors, which allow more opportunities to distribute goods and services from the local market to the world market. The financial markets, which always seek to maximize revenues, created developed business development companies (“BDCs”) and closed-end mutual funds (“MFs”) that act as a VC funds. The noted exception is, as public market securities, there is no lock up period, but there is liquidity. Que Ventures can apply a risk methodology to the public security and review the underlying securities to ensure it meets the investment objective.
For optimal modern portfolio theory, then Que Ventures believes that fixed income exposure needs to be part of the risk spectrum. Again, as the financial markets expand and technology provides secure methods to transfer funds, new security types are created. The peer-to-peer lending (“P2P”) marketplace (such as The Lending Club and Prosper) provides an opportunity to invest in fixed income securities. The P2P marketplace facilitates the credit check and credit seeking process, while vetting investment opportunities, which allows investors to access personal and SME loans. Fixed income securities typically yield above market rates (i.e., A rated bonds have higher yields than the equivalent public market bond). In addition, the P2P marketplace provides transparency (above public markets) in the default rate, among other metrics required to make an investment decision. The P2P marketplaces provide business loans, which aligns with the Que Ventures mission to encourage new business development.
The financial markets are correlated. The modern portfolio theory provides expected returns by including equity and fixed income securities to create diversification and un-correlated assets. The basic correlation between the private markets (typically VC investments) and public markets is roughly 60-70%. Que Ventures believes the new economy and investment return correlations provides the opportunity to provide alpha in the risk parity investment philosophy.
Alpha is the performance above the market (beta) returns. Alpha is the holy grail of the investment community and it takes a significant capital and research to repeatedly provide alpha to investors via the public markets. Que Ventures believes micro-entrepreneurs (individuals) that leverage the existing marketplaces will create alpha.
Que Ventures looks to provide capital to individuals that have specific skill sets that translate to selling goods (and services) through existing marketplaces. Que Ventures provides small amounts of capital and VC-type services to help turn a hobby (or skill) into a business.
All of these factors are the reason Que Ventures believes a unique opportunity exists.