Search

Search
Home / Insights

What Is Venture? An Interstellar Journey Toward a New Definition 

  • Market commentary

February 20, 2025 | 4 min read

Scott Voss

Managing Director, Senior Market Strategist

Contact us

Over the past few years, there has been a rollercoaster of enthusiasm, pessimism, opportunism, skepticism, and confusion within the venture capital industry. How a company identifies, or how we identify a company, changes depending on where the company sits in its life, what industry it is in, and how the broader universe of capital markets choose to participate in the company’s journey.

This has prompted an increasingly common and fundamental question: “What is venture?” Or, depending on the mood, a more tense and concerned, “What is venture?!”

Given this, it seems worth:

  • Defining what we know venture is.
  • Considering and asking the question, “Is this venture?” 
  • And identifying a new capital market dynamic, where we boldly state, “This is venture!”

Venture is this: A traditional definition

When speaking to clients about what venture is, I often quote Joseph Schumpeter or Nikola Tesla. Their works describe the entrepreneur’s obsessive commitment in a way I have found evocative: According to Tesla, “the entrepreneur’s emotion can cause one to forget food, sleep, friends, love, and everything.”  

This start of the journey is where venture capital traditionally invests: at the intersection of innovation and the entrepreneur at the company formation stage, and post this fusion event, a new star is born.

The journey of the entrepreneur can be thought of like this star: a nebulous idea catalyzed by venture capital to create a celestial body. Value added venture capital, through subsequent rounds, continues to fuel its rise as it ascends through the atmosphere leading up to what is believed to be the ultimate celestial moment: the IPO, the supernova. 

In venture speak, investing in a seed or series A for as little as approximately $2 million on a $10 million valuation and following through subsequent rounds up until the IPO is the ultimate textbook journey.  

The most recent successful venture backed IPOs have tapped the public markets at valuations between $5 billion and $10 billion. From a return standpoint, this translates to a potential 500x to 1000x return for the original investor who participated in the protostar stage. Examples of recent IPOs that fit this valuation profile include Astera Labs, Reddit, Rubrik, and ServiceTitan.  

Since venture has been an institutional asset class, the company life cycle described above is mostly accepted as what venture is.  

But for some, the journey does not end with IPO.  

Is this venture? A blurred line in modern times

More recently, the line defining venture has blurred, most notably between venture capital, private equity, and even the public markets which are at times acting as the pathway.  

If you look back at some of the largest private equity deals over the past two years, they are public to privates in what were once successful venture backed companies that IPO’ed but, regrettably, could not achieve market dominance. To use the metaphor from above, they gave in to gravity and reentered the private market atmosphere in search of value-added capital.  

There are various case studies for the “why,” but for many, it is a valuation and transformation arbitrage to help a company on its journey from “grow at all costs” to the “rule of 40.” But trust, once the private market mission is complete, the likely goal is to harness escape velocity following a slingshot assisted orbit around the moon, to again enter the public domain — as a mature, growing, profitable company.  

Recent examples here include Qualtrics, Squarespace, Nuvei, Darktrace, and Alteryx. The facilitators were well known private equity shops including Advent, Permira, Silver Lake, Thoma Bravo, Insight, among others. These are firms that define private markets and now serve as mission control for the companies they own.  

Prior to their successful IPOs, these companies were in venture portfolios of funds managed by Accel, Index, Insight, Sequoia, and even Ryan Reynolds. We believe most limited partners (LPs) would consider this to be an A-list of venture managers who, like their bigger siblings above, also define their own private markets. The companies noted above were key contributors allowing these market definers to achieve A-list status.  

What is interesting about the first venture definition versus this second venture definition is that these technology companies are being traded within the capital markets at valuations between $5-10 billion using the public market as a kind of wormhole.  

For many purists, it is a stretch to call this venture. But if we accept the company is a healthy grower, aspiring to define its market, recalibrating, and course correcting, on a mission to achieve better, faster, cheaper in this trade through the wormhole, can we accept that this is venture under a more liberal definition?  

If your answer is still “no way!” then bear with me for just a minute more.  

This is venture: Defining the universe!

Now that we have established venture’s traditional journey from entrepreneur and an idea to $5-10 billion IPO, transitioning in and out of the public and private markets at the same $5-10 billion value, let’s discuss the more provocative cohort that has emerged as market leading and market defining companies, choosing to totally bypass the IPO — at least for now.   

Dare we call these iconoclasts the Masters of the Universe?

This cohort, which includes SpaceX, ByteDance, Stripe, Databricks, OpenAI, Anthropic and others are lining up in this unprecedented Space Race. They continue to raise venture capital from traditional venture firms, secondary investors, private equity, sovereign wealth funds, and leading financial institutions.  

They are not raising $2 million on $10 million, or even $100 million on $2 billion. They are raising $1 billion, $5 billion, $10 billion on $50 billion, $100 billion, $300 billion values. These valuations are 10-50 times the values of the most recent, and so-called “most successful” venture-backed IPOs.

Recently, this part of the capital markets has caused much debate. At the core is the question, “is this venture?” It is investing in emerging companies in emerging industries. These industries have current and future total addressable markets bigger than any we have ever seen. Some experts estimate the markets for Space and Artificial Intelligence will each reach $2-4 trillion within 10 years.1 These companies are on a one-way mission to define their markets. But it is not $2 million on $10 million, it is $10 billion on $100 billion.  

Regardless of whether it is venture or not, it is a very large private market investment opportunity that is attracting attention, enthusiasm, and capital. And, if we revisit Schumpeter and Tesla, they are embodied by words like disruption, innovation, productivity, growth, thrill, success, and emotion, “which can cause one to forget food, sleep, friends, love, and everything.”  

Connect with HarbourVest

Contact us

Follow us

Linkedin Instagram

The closing from the captain’s log 

At the beginning of Star Trek, Captain Kirk delivers his iconic monologue. It famously starts, “Space, the final frontier.”  

I believe this to be the true venture journey: the point of inception when the entrepreneur and an idea together combine at the company formation stage, seeking to achieve the most ambitious of all outcomes, the IPO.  

And then the protagonist entrepreneur pivots to, in Kirk’s words, “exploring strange new worlds, seeking out new life and new civilizations.” The entrepreneur encounters the public to private transaction, challenging what they think they know or believe to be the truth. The public market is supposed to be the end of the venture journey, the celestial moment, not the beginning. Is this venture?  

Not long after, they come across life forms they have never seen before, in markets so vast they are almost immeasurable. Growing at 100+% per year, defining their markets, but 25 – 50 times the size of their closest peer, “boldly going where no company has gone before!”  

Today, this is venture — and what an exciting journey it continues to be. 

Footnotes
  1. https://bluetree.digital/ai-industry-growth-metrics/ and https://datacatalyst.org/cosmic-cashflow-why-space-will-be-worth-2-trillion-by-2035/\
Disclosure

HarbourVest Partners, LLC (“HarbourVest”) is a registered investment adviser under the Investment Advisers Act of 1940. This material is solely for informational purposes; the information should not be viewed as a current or past recommendation or an offer to sell or the solicitation to buy securities or adopt any investment strategy.  In addition, the information contained in this document (i) may not be relied upon by any current or prospective investor and (ii) has not been prepared for marketing purposes. In all cases, interested parties should conduct their own investigation and analysis of the any information set forth herein and consult with their own advisors. HarbourVest has not acted in any investment advisory, brokerage or similar capacity by virtue of supplying this information.  The opinions expressed herein represent the current, good faith views of the author(s) at the time of publication, are not definitive investment advice, and should not be relied upon as such. This material has been developed internally and/or obtained from sources believed to be reliable; however, HarbourVest does not guarantee the accuracy, adequacy or completeness of such information. The information is subject to change without notice and HarbourVest has no obligation to update you.  There is no assurance that any events or projections will occur, and outcomes may be significantly different than the opinions shown here. This information, including any projections concerning financial market performance, is based on current market conditions, which will fluctuate and may be superseded by subsequent market events or for other reasons. The information contained herein must be kept strictly confidential and may not be reproduced or redistributed in any format without the express written approval of HarbourVest.    

More from HarbourVest

Professional Investor Definition

“Professional Investor” under the Securities and Futures Ordinance (Cap. 571 of the Laws of Hong Kong) (the “SFO”) and its subsidiary legislation) means:

(a) any recognised exchange company, recognised clearing house, recognised exchange controller or recognised investor compensation company, or any person authorised to provide automated trading services under section 95(2) of the SFO;

(b) any intermediary, or any other person carrying on the business of the provision of investment services and regulated under the law of any place outside Hong Kong;

(c) any authorized financial institution, or any bank which is not an authorised financial institution but is regulated under the law of any place outside Hong Kong;

(d) any insurer authorized under the Insurance Ordinance (Cap. 41 of the Laws of Hong Kong), or any other person carrying on insurance business and regulated under the law of any place outside Hong Kong;

(e) any scheme which-

(i) is a collective investment scheme authorised under section 104 of the SFO; or

(ii) is similarly constituted under the law of any place outside Hong Kong and, if it is regulated under the law of such place, is permitted to be operated under the law of such place,

or any person by whom any such scheme is operated;

(f) any registered scheme as defined in section 2(1) of the Mandatory Provident Fund Schemes Ordinance (Cap. 485 of the Laws of Hong Kong), or its constituent fund as defined in section 2 of the Mandatory Provident Fund Schemes (General) Regulation (Cap. 485A of the Laws of Hong Kong), or any person who, in relation to any such registered scheme, is an approved trustee or service provider as defined in section 2(1) of that Ordinance or who is an investment manager of any such registered scheme or constituent fund;

(g) any scheme which-

(i) is a registered scheme as defined in section 2(1) of the Occupational Retirement Schemes Ordinance (Cap. 426 of the Laws of Hong Kong); or

(ii) is an offshore scheme as defined in section 2(1) of that Ordinance and, if it is regulated under the law of the place in which it is domiciled, is permitted to be operated under the law of such place,

or any person who, in relation to any such scheme, is an administrator as defined in section 2(1) of that Ordinance;

(h) any government (other than a municipal government authority), any institution which performs the functions of a central bank, or any multilateral agency;

(i) except for the purposes of Schedule 5 to the SFO, any corporation which is-

(i) a wholly owned subsidiary of-

(A) an intermediary, or any other person carrying on the business of the provision of investment services and regulated under the law of any place outside Hong Kong; or

(B) an authorized financial institution, or any bank which is not an authorised financial institution but is regulated under the law of any place outside Hong Kong;

(ii) a holding company which holds all the issued share capital of-

(A) an intermediary, or any other person carrying on the business of the provision of investment services and regulated under the law of any place outside Hong Kong; or

(B) an authorized financial institution, or any bank which is not an authorised financial institution but is regulated under the law of any place outside Hong Kong; or

(iii) any other wholly owned subsidiary of a holding company referred to in subparagraph (ii); or

(j) any person of a class which is prescribed by rules made under section 397 of the SFO for the purposes of this paragraph as within the meaning of this definition for the purposes of the provisions of the SFO, or to the extent that it is prescribed by rules so made as within the meaning of this definition for the purposes of any provision of the SFO.

The first of such classes of additional “professional investor”, under the Securities and Futures (Professional Investor) Rules (Cap. 571D of the Laws of Hong Kong), are:

(k) any trust corporation (registered under Part VIII of the Trustee Ordinance (Cap. 29 of the Laws of Hong Kong) or the equivalent overseas) having been entrusted under the trust or trusts of which it acts as a trustee with total assets of not less than HK$40 million or its equivalent in any foreign currency at the relevant date (see below) or-

(i) as stated in the most recent audited financial statement prepared-

(A) in respect of the trust corporation; and

(B) within 16 months before the relevant date;

(ii) as ascertained by referring to one or more audited financial statements, each being the most recent audited financial statement, prepared-

(A) in respect of the trust or any of the trust; and

(B) within 16 months before the relevant date; or

(iii) as ascertained by referring to one or more custodian (see below) statements issued to the trust corporation-

(A) in respect of the trust or any of the trusts; and

(B) within 12 months before the relevant date;

(l) any individual, either alone or with any of his associates (the spouse or any child) on a joint account, having a portfolio (see below) of not less than HK$8 million or its equivalent in any foreign currency at the relevant date or-

(i) as stated in a certificate issued by an auditor or a certified public accountant of the individual within 12 months before the relevant date; or

(ii)  as ascertained by referring to one or more custodian statements issued to the individual (either alone or with the associate) within 12 months before the relevant date;

(m) any corporation or partnership having-

(i) a portfolio of not less than HK$8 million or its equivalent in any foreign currency; or

(ii) total assets of not less than HK$40 million or its equivalent in any foreign currency, at the relevant date, or as ascertained by referring to-

(iii) the most recent audited financial statement prepared-

(A) in respect of the corporation or partnership (as the case may be); and

(B) within 16 months before the relevant date; or

(iv) one or more custodian statements issued to the corporation or partnership (as the case may be) within 12 months before the relevant date; and

(n) any corporation the sole business of which is to hold investments and which at the relevant date is wholly owned by any one or more of the following persons-

(i) a trust corporation that falls within the description in paragraph (k);

(ii) an individual who, either alone or with any of his or her associates on a joint account, falls within the description in paragraph (k);

(iii) a corporation that falls within the description in paragraph (m);

(iv) a partnership that falls within the description in paragraph (m).

For the purposes of paragraphs (k) to (n) above:

  • “relevant date” means the date on which the advertisement, invitation or document (made in respect of securities or structured products or interests in any collective investment scheme, which is intended to be disposed of only to professional investors), is issued, or possessed for the purposes of issue;
  • “custodian” means (i) a corporation whose principal business is to act as a securities custodian, or (ii) an authorised financial institution under the Banking Ordinance (Cap. 155 of the Laws of Hong Kong); an overseas bank; a corporation licensed under the SFO; or an overseas financial intermediary, whose business includes acting as a custodian; and
  • “portfolio” means a portfolio comprising any of the following (i) securities; (ii) certificates of deposit issued by an authorised financial institution under the Banking Ordinance (Cap, 155 of the Laws of Hong Kong) or an overseas bank; and (iii) except for trust corporations, cash held by a custodian.

Institutional Investor / Accredited Investor Definition

An institutional investor as defined in Section 4A of the SFA and Securities and Futures (Classes of Investors) Regulations 2018 is:

(a) the Singapore Government;

(b) a statutory board as may be prescribed by regulations made under section 341 of the SFA, as prescribed in the Second Schedule of the Securities and Futures (Classes of Investors) Regulations 2018;

(c) an entity that is wholly and beneficially owned, whether directly or indirectly, by a central government of a country and whose principal activity is —

(i) to manage its own funds;

(ii) to manage the funds of the central government of that country (which may include the reserves of that central government and any pension or provident fund of that country); or

(iii) to manage the funds (which may include the reserves of that central government and any pension or provident fund of that country) of another entity that is wholly and beneficially owned, whether directly or indirectly, by the central government of that country;

(d) any entity —

(i) that is wholly and beneficially owned, whether directly or indirectly, by the central government of a country; and

(ii) whose funds are managed by an entity mentioned in sub‑paragraph (c);

(e) a bank that is licensed under the Banking Act 1970;

(f) a merchant bank that is licensed under the Banking Act 1970;

(g) a finance company that is licensed under the Finance Companies Act 1967;

(h) a company or co‑operative society that is licensed under the Insurance Act 1966 to carry on insurance business in Singapore;

(i) a company licensed under the Trust Companies Act 2005;

(j) a holder of a capital markets services licence;

(k) an approved exchange;

(l) a recognised market operator;

(m) an approved clearing house;

(n) a recognised clearing house;

(o) a licensed trade repository;

(p) a licensed foreign trade repository;

(q) an approved holding company;

(r) a Depository as defined in section 81SF of the SFA;

(s) a pension fund, or collective investment scheme, whether constituted in Singapore or elsewhere;

(t) a person (other than an individual) who carries on the business of dealing in bonds with accredited investors or expert investors;

(u) a designated market‑maker as defined in paragraph 1 of the Second Schedule to the Securities and Futures (Licensing and Conduct of Business) Regulations;

(v) a headquarters company or Finance and Treasury Centre which carries on a class of business involving fund management, where such business has been approved as a qualifying service in relation to that headquarters company or Finance and Treasury Centre under section 43D(2)(a) or 43E(2)(a) of the Income Tax Act 1947;

(w) a person who undertakes fund management activity (whether in Singapore or elsewhere) on behalf of not more than 30 qualified investors;

(x) a Service Company (as defined in regulation 2 of the Insurance (Lloyd’s Asia Scheme) Regulations) which carries on business as an agent of a member of Lloyd’s;

(y) a corporation the entire share capital of which is owned by an institutional investor or by persons all of whom are institutional investors;

(z) a partnership (other than a limited liability partnership within the meaning of the Limited Liability Partnerships Act 2005) in which each partner is an institutional investor.

An accredited investor as defined in Section 4A of the SFA and Securities and Futures (Classes of Investors) Regulations 2018 is:

(i)  an individual —

(A) whose net personal assets exceed in value $2 million (or its equivalent in a foreign currency) or such other amount as the Authority may prescribe in place of the first amount;

(B) whose financial assets (net of any related liabilities) exceed in value $1 million (or its equivalent in a foreign currency) or such other amount as the Authority may prescribe in place of the first amount, where “financial asset” means —

(BA) a deposit as defined in section 4B of the Banking Act 1970;

(BB) an investment product as defined in section 2(1) of the Financial Advisers Act 2001; or

(BC) any other asset as may be prescribed by regulations made under section 341; or

(C) whose income in the preceding 12 months is not less than $300,000 (or its equivalent in a foreign currency) or such other amount as the Authority may prescribe in place of the first amount;

(ii)  a corporation with net assets exceeding $10 million in value (or its equivalent in a foreign currency) or such other amount as the Authority may prescribe, in place of the first amount, as determined by —

(A) the most recent audited balance sheet of the corporation; or

(B) where the corporation is not required to prepare audited accounts regularly, a balance sheet of the corporation certified by the corporation as giving a true and fair view of the state of affairs of the corporation as of the date of the balance sheet, which date must be within the preceding 12 months;

(iii) A trustee of a trust which all the beneficiaries are accredited investors; or

(iv) A trustee of a trust which the subject matter exceeds S$10 million; or

(v) An entity (other than a corporation) with net assets exceeding S$10 million (or its equivalent in a foreign currency) in value. “Entity” includes an unincorporated association, a partnership and the government of any state, but does not include a trust; or

(vi) A partnership (other than a limited liability partnership) in which every partner is an accredited investor; or

(vii) A corporation which the entire share capital is owned by one or more persons, all of whom are accredited investors.

Continuation solutions encompass a host of transaction types in which a GP secures interim liquidity and/or additional primary capital for their LPs in a strongly performing asset, or set of assets, that the GP will continue to own and control. Specifically, they include continuation funds, new funds created by GPs for the purpose of acquiring the asset(s) that continue to be managed by the same GP and capitalized by one or several secondary buyers, or equity recapitalizations involving a direct equity or structured equity investment into a portfolio company. These transactions can also include a parallel investment from the GP’s latest fund into that same pool of assets (a “cross-fund trade”).