The real fun begins when venture capital starts to deploy micro-private equity risk (as I explain in The State of Venture Capital), and private equity starts to play with venture capital deals.
While private equity and venture capital are both lodged in the same asset-class bucket, based on the similar purchase of privately held shares, the risk profile of venture capital and private equity could not be more diametrically opposite.
Private equity deploys risk to the downstream operational excellence of an existing normalization of truth, while venture capital is supposed to deploy risk to an unprecedented upstream reinvention derived from a new normalization of truth.
Meaning, the placement of venture capital in the private equity asset-class bucket is evidence asset-managers have no clue what they are doing. Assets should be organized by risk profile, not by distribution type.
