Venture Capital as a Retirement Plan

One of the mission statements for Frequency Ventures is to assist superannuation funds place funds into alternative investments in information technology venture capital funds.

The Australian superannuation system requires your employer to make regular contributions into an employees super account. This is the Superannuation Guarantee and it is equivalent to 9.5% of your wage. Super is compulsory for most employed Australians as a way to save for retirement. As the below graph shows, this will continue to increase over the next 6 years to 12.5%.

It is worth noting that Venture Capital General Partners also invest into their venture capital funds known as “partner commitments” – generally up to 2% of the entire fund (depending on size). The theory is that limited investment partners (LPs) are then aligned with General Partners who while operating the venture fund have substantial dollar amounts invested as well. Goals are aligned! General Partners often keep re-investing their profits into subsequent funds to show continuous commitment. Like Superfund contributions, General Partner contributions take decades to build up.

One such partner I’ve known for over 10 years is Michael Berolzheimer, Founding General Partner of Bee Partners, a San Francisco ‘first check’ venture fund with US$30M+ raised in Fund II and more recently closing of Fund III at US$43M. Michael’s own money saved from investing since the age or 12 years old has been ploughed back into his seed funds which landed him as an early stage investor in TubeMogul which Adobe acquired for US$540M in 2016. Another of Bee Partners successful portfolio companies is BuildingConnected’s $275M exit to Autodesk.

On a walk last week with Michael along the Piers off Embarcadero in San Francisco, we discussed being ‘lifers’ in the venture capital funds we’re involved with.

This is an important distinction Frequency Ventures make when working with US Venture Capital Funds as the partners have decided to not just dedicate themselves to the next 25 years of working in their venture funds, yet have invested a significant amount of their own capital for retirement committed. Michael’s commitment per Bee Partners fund is 5%, not 2% of committed capital.

This is the type of alignment we look for when selecting venture capital funds to work with the Australian Superannuation Funds.