By Jeff McClean
Venture capital investment opportunities are exciting, dynamic, and fast-moving. Each investment has the potential to provide an enormous return and oozes with potential. And for many of the families and entrepreneurs we serve, it’s deeply personal.
Whether you’ve recently exited a business, received a liquidity event, or simply want to back the next generation of founders, venture investing can feel like a natural next step.
At Solidarity Wealth, we help our clients step into this world thoughtfully—balancing the excitement of private investing with the discipline of a long-term financial plan.
Why Venture Investing Appeals to Our Clients
Many of our clients are successful founders or startup executives who have built incredible businesses from the ground up. After years of pouring energy and capital into their companies, they find themselves in a unique position: capitalized, connected, and curious about what’s next.
For these clients, venture investing goes beyond the numbers; it’s a way to stay engaged, make an impact, and stay connected to the entrepreneurial spirit that helped build their own success. They love mentoring, staying close to innovation, and contributing to the entrepreneurial ecosystem. But while venture capital can offer tremendous upside, it also comes with serious risks that are often misunderstood or underestimated.
What Most People Don’t Realize About Venture Capital
The truth is, even the best venture funds lose money on the vast majority of their investments. Roughly 80–90% of the companies in a typical VC portfolio will return very little to nothing. That’s just how the math works.
Returns are generated by the one or two “home runs” that deliver 10X, 50X, or even 100X. If you’re not invested across a wide enough range of startups, or if you miss those breakout companies, you’re left with little to show for it.
That’s why diversification is key. If you can’t reasonably invest in 15 to 20 startups on your own, you should seriously consider participating through a venture fund.
Fund vs. Direct Investment: Which Is Right for You?
We work with clients who pursue both models: direct investing and fund participation. Here’s what we tell them:
- Go direct if you have strong deal flow, the capacity to mentor founders, and enough capital to spread across multiple companies.
- Go through a fund if you want exposure to the asset class but lack the network or diversification needed to build a standalone portfolio.
Many of our clients prefer a hybrid approach, backing one or two companies they personally believe in, built by friends or former employees, while utilizing funds to gain broader exposure.
Choosing the Right Venture Fund
Not all venture funds are created equal. Here’s what we help clients look for:
- A proven network: VC is a game of access. Do the fund leaders have a history of getting into competitive rounds?
- A track record: Past performance isn’t everything, but it’s a good signal.
- A defined niche: Specialization in areas such as SaaS, defense, or biotech, or exclusive networks affiliated with accelerators or certain universities, can give smaller funds an edge over the big names.
- Fund terms: Be cautious of extended lockups. A 10-year fund with multiple extensions means your money could be tied up for 15 years. And for that kind of illiquidity, you should expect a significant return.
We help our clients understand not just the strategy on paper, but what it means in real life. How long will your money be locked up? What kind of communication should you expect from the fund? Do the economics make sense when you model it out? These are the kinds of questions we walk through together.
How Venture Fits Into a Broader Wealth Strategy
At Solidarity Wealth, we use a 5-Bucket Wealth Building Strategy that helps organize investments across different risk and liquidity levels. Venture capital fits into the fifth bucket—reserved for private investments with the highest return potential and the lowest liquidity.
This bucket is often the most exciting, but also the easiest to overfill. Just because you’ve received a liquidity event doesn’t mean you should rush to deploy capital into a venture. Once the money is locked up, it’s gone. You can’t access, borrow against, or redirect it if your needs change.
This is why we help clients carefully balance between liquid assets, cash-flow needs, and long-term growth strategies. Having a strong balance sheet filled with private investments might look impressive—but it doesn’t keep the lights on at your vacation property, pay for the jet fuel, or pay for your children’s private school tuition. If everything is locked up for 10–15 years, you need to be confident your overall financial plan can support that lack of liquidity.
Be Clear on Your Motivation
Before you make a venture investment, ask yourself: Why am I doing this?
- Is it to support a friend’s company?
- Is it to be part of the local startup scene?
- Or is it based on a clear investment thesis and risk-adjusted return expectation?
There’s no wrong answer. However, knowing your reason helps us ensure the investment aligns with your broader financial strategy, rather than just a moment of FOMO.
Making the Most of Your Venture Capital Opportunities
Venture capital can be a powerful way to grow wealth, stay involved in innovation, and give back to the entrepreneurial world that helped you succeed. But it should always be part of a bigger plan, not a reaction to liquidity.
The Solidarity Wealth team helps successful entrepreneurs, executives, and families navigate the complexity of private investing. From sourcing opportunities to vetting funds and building a diversified plan, we’re here to guide you at every stage.
And while venture gets most of the buzz, it’s just one piece of the private investing landscape. Next month, we’ll look at private equity: what’s changed, what hasn’t, and how to think critically about PE opportunities in today’s higher-rate, lower-exit environment.
If you’re interested in exploring how venture capital fits into your personal wealth strategy, email us at info@solidaritywealth.com or call 385-374-1665 to schedule a discovery call.
About Jeff
For over a dozen years, Jeff McClean has advised some of the country’s most successful families on all aspects of their wealth. With his background as a former tax and estate planning attorney at a prominent Houston, Texas, law firm, Jeff has advised clients through business sales, funding rounds, IPOs, complex tax and wealth planning transactions, private and public market investments, executive compensation packages, succession planning, and much more. In short, Jeff helps clients navigate the unique challenges that come with building wealth and helps them better predict their financial future.
In addition to co-founding Solidarity Wealth, Jeff advises single-family offices on a broad array of challenges. He also serves as the Managing Partner of Solidarity Capital, an income fund managed separately by the Solidarity partners.
Jeff is a sought-after thought leader on a wide range of tax, finance, and estate planning topics. Jeff has appeared on CNBC, Bloomberg, and Fox Business, has been quoted in The Wall Street Journal, Barron’s, and Yahoo!Finance, has published in diverse publications from Silicon Slopes Magazine to the Taxation of Exempts Journal by Thomson Reuters, and spoken to endless professional groups and large company conferences.
Jeff holds a bachelor’s degree in accounting from Brigham Young University – Idaho and a Juris Doctor, with honors, from the University of Texas School of Law. Outside of work, Jeff is married and the father of three amazing children. He has also served as past president of the Salt Lake Estate Planning Council.
Solidarity Wealth is a registered investment adviser. This material is solely for informational purposes. Advisory services are only offered to clients or prospective clients where Solidarity Wealth and its representatives are properly licensed or exempt from licensure. Past performance is no guarantee of future returns. Investing involves risk and possible loss of principal capital. No advice may be rendered by Solidarity Wealth unless a client service agreement is in place.
