Kind of clickbait title? It's an investor that convinced a local school to invest $15k in a $500k investment that his partners couldn't put down. This time they lucked out... but isn't this in general kind of reckless as there's no guarantee for RoI at all and the school is kind of taking away the money from the kids?
Also how are schools allowed to invest like this at all?
I happen to know a lot about this situation, and there wasn't anything sketchy at all:
1) St. Francis is an expensive ($17k a year, which is actually pretty low for the area) private school, not a public school that receives funding from the government.
2) Most private schools have endowments and investment vehicles to manage those endowments. Tuition money generally isn't going into these funds, rather they're for donations and capital campaigns.
3) Many of the parents of the kids at St. Francis are tech executives or VCs, so it's not surprising that they're investing in startups instead of more traditional mutual or index funds.
This is an educational program for the kids through the school. Lightspeed is definitely not struggling to fill out a $500k allocation... a general partner of the fund just happened to be a school parent and got the school club into the deal. A very Silicon Valley and unusual thing for a school club for sure, but nothing sketchy at all.
Definitely not sketchy as you mentioned, but according to the article the parent is right about the allocation:
> It turns out that Eggers actually persuaded his partners to cough up only $485,000 of the $500,000 investment. On his invitation, Natalie and Andrew’s school, St. Francis High School in Mountain View, Calif., chipped in the remaining $15,000.
I read on another article that he's on the board of the school's investment fund which backs startups. So it's a strategic initiative and definitely not sketchy as it's a private school.
> It turns out that Eggers actually persuaded his partners to cough up only $485,000 of the $500,000 investment.
This almost certainly means convincing his partners to let someone else come in instead if LVP taking the whole $500k. Lightspeed has over $3B in assets under management and $500k is already at the low end of check sizes they'd generally write. On the other hand, squeezing a friend into an interesting deal is a big favor.
I get your point, and you can pretty much tell it is a Catholic school from the name, but in California, there are plenty of public schools named after Catholic saints because there are a ton of cities named after Catholic saints. Santa Monica High School, San Jose High School, San Miguel Elementary School. I think the tip off is whether the it's anglicized or not.
The tipoff is whether the schools' name is based on the name of the city, no?
In the Los Altos Mountain View area, I can name St. Nicholas, St. Simon, and St. Francis which are all private schools, none of which are named after the city that they are in.
> I think the tip off is whether the it's anglicized or not
There are definitely both public and private schools in California with the names of Catholic saints in both English and Spanish on each side, so that's not a certain tip off.
Historically, to protect middle class people's retirement from swindlers and high-risk business deals, companies raising equity rounds are given the choice of three options: a) go public and accept the discipline of reporting requirements (which, the theory goes, de-risks the investments relative to private companies), b) raise money only from people one has a pre-existing social connection with (so called "friends and family" investment, which the government believes are less likely to be out-and-out scams and which would be difficult to sensibly prohibit anyway), or c) solicit investment actively, but only from sophisticated investors or investors who can afford sophisticated advisors.
The vast majority of startups choose door #3, which requires that they raise from "accredited investors." There are a few ways to hit the sophistication bar; the most commonly invoked are an asset test (~$1 million in net worth exclusive of positive home equity) or an income test ($250k in income for 2 years with expectation of same in the future).
This makes many normal people in the tech industry and in the professions (doctors, lawyers) into accredited investors, but excludes much of the middle class.
Reasonable people can disagree on whether this is good policy, but it is more-or-less the law in the US. There are recently some exceptions due to the crowdfunding law, but they're as-of-yet outside of the startup mainstream.
Accredited investors can't necessarily get into any particular deal; the most desirable companies quickly fill up, and since Snap was a fairly desirable company, the fact that an investor convinced their co-investors to sacrifice allocation in favor of getting a favored charity involved was basically a charitable donation all around. Accredited investors can generally find a company willing to take their money, but most investments in startups do not go well, even when the startups are executed competently. (This is the reason we have laws preventing e.g. 40 year old teachers from taking out a HELOC to put $100k into photo sharing for dogs.)
It's a bit different when a friend, who has wealth and power, asks you if you want to invest in something. He doesn't need your money. Snapchat likely didn't need that 15k from the school. They could have gotten it elsewhere.
You know, I spent a few hours this morning almost fuming at how insanely lucky it is to get a return on $15k like that. I started panting at the possibility that I might somehow get this lucky, but of course, turns out it was $15k of a $500k investment -_-'
There was a story on Reddit a while back about a soldier who bought a Rolex in the 1960s for $120, and it was worth $70,000 today. Pretty lucky, right? But then someone pointed out that if he'd invested in the S&P 500 instead, it would be worth $25,000 today (if I remember the figures correctly).
It's pretty hard to outdo investing in the S&P 500, and most anyone can do it.
> There was a story on Reddit a while back about a soldier who bought a Rolex in the 1960s for $120, and it was worth $70,000 today.[0]
> Pretty lucky, right? But then someone pointed out that if he'd invested in the S&P 500 instead, it would be worth $25,000 today (if I remember the figures correctly).
What's not said is that from 1960 till 1980, you'd only make 200% (10% annualized). Compared to angel investing giving you 250% over 4 years (62.5 annualized).[1]
This is also assuming you know how to time your trades properly and get in at a bottom. If you got in at the floor of the dot com crash you'd make, at most, 180% in the 15 years you held (12% annualized). If you got in at the floor of the 07-09 crash you'd make, at most, 250% in the 9 years you held (28% annualized). These are best case scenarios and it's unlikely for someone that believes in the S&P will know about market timing.
The base of this argument is laden with guilt and regret over not having 20/20 hindsight. "If you got in at X you would have Y." The same is said with BTC, "if you got in at the beginning you would have been an Xillionaire!"
However, this is no longer practical in the ironed-out, risk-adjusted world we live in now. The S&P's risk has been priced in and over-sized returns are no longer possible. You'll start seeing this with startups in the coming years too. As people start understanding them more, risk will be lower, and thus returns will be lower.
It is not practical to guess at picking the right unicorn investment, collectible, or market timing. It remains practical, however, to invest in broad market indices. You won't become a zillionaire, but with consistent investing and discipline, such boring strategies pay off in the long term.
If you're willing to accept more risk/return than the S&P 500, there are Nasdaq index funds, too.
To play with various scenarios, there's a calculator:
Also how are schools allowed to invest like this at all?