Ark's Cathie Wood changed Wall Street. Now, she's set her sights on venture capital.
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- Cathie Wood's Ark Venture Fund allows retail investors to invest in high-growth startups.
- The fund's net assets have climbed to $69 million, roughly tripling year over year.
- Despite growth, the fund lags behind the S&P 500, raising questions about its returns.
Cathie Wood attracted billions of dollars with her fresh approach to betting on tech stocks, combining bold calls on the future with the ability for investors to buy and sell in an instant.
Wood's effort to do something similar for venture capital has delivered investments in many of Silicon Valley's hottest deals. Though its investors will have to wait much longer before they see any returns.
Wood's firm Ark Invest debuted a new closed-end interval fund in 2022, allowing investors to throw as little as $500 into a vehicle that invests in private startups. Investors can buy and sell shares in the fund just as they do with stocks, with some restrictions.
"Our goal here is to provide the best venture portfolio in the world to everyone in the world, not just to the rich and the famous," said Brett Winton, who works closely with Wood as chief futurist at Ark Invest and is an architect of the firm's venture capital strategy.
The fund, Ark Venture Fund, has now gathered close to $70 million in assets, some distance from venture giants like Sequoia and Andreessen Horowitz, or even Ark's other funds. ARKK, Wood's most famous fund, has $5.8 billion in assets, down from a peak of $50 billion.
Despite its small size, the fund has clinched deals to invest in Figure, a Jeff Bezos-backed startup developing humanoid robots, xAI, an artificial-intelligence firm founded by Elon Musk, and OpenAI, the maker of ChatGPT.
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It raises the question of why aging startups SpaceX, Epic Games, and Databricks, which have raised billions in funding, bother to include Ark in new rounds. SpaceX is Ark Venture Fund's largest holding, accounting for 13% of the fund's total assets, worth around $9 million.
Winton said it's a subject he's frequently addressed in early meetings with founders.
First, Ark produces reams of original research on areas of investment. Winton said this research helps the firm win over teams because it demonstrates a grasp of their breakthrough technologies. "It means we can engage in really constructive conversations with them about their strategy," Winton said.
Second, because Ark invests in both the private and public markets, it offers relationships with potential customers across the size spectrum of enterprises.
Lastly, unlike a traditional venture fund, which has a fixed lifespan to invest the capital and return the profits to the fund's investors, Ark set up its venture fund to continue indefinitely, allowing investors to enter and exit the fund on a periodic basis.
This provides flexibility to hold shares of companies after they go public, which can be particularly attractive for founders who are looking for investors with a long-term outlook and a higher tolerance for market volatility.
In October, Ark invested at least $250 million into OpenAI's latest round, which pushed the AI startup's valuation to $157 billion.
Most of that investment came from a related private venture fund that's only for high-net-worth investors. OpenAI makes up just 5% of the Ark Venture Fund's portfolio, which means it has less than $4 million invested.
"We would prefer to be able to write larger checks out of the venture fund than we currently can," Winton said.
For that to happen, the fund will need to attract more investors.
Though the fund is up 36% since its inception date, it's down 3% year to date, according to the website. The S&P 500 in comparison is up 26% this year, with surging tech stocks and Donald Trump's election win driving record highs.
Ark Venture Fund charges a flat fee for investing assets under its control, the same as a venture fund. The fee, 2.75%, is high relative to other interval funds, according to Morningstar, but it doesn't take carried interest or a share of profits.
Winton said the fund could accrue assets into the billions of dollars; on a follow-up call, he walked back his comment, saying it's hard to know how big the fund could get.
"If that happens, then that'll actually become the story of Ark," he said. "Ark kind of changed venture capital."