Los Angeles Times

Sixty-four cents of every venture dollar invested in the United States last year went to a company headquartered in California. Almost none of it was available to the people who live there.

That is not a complaint about fairness so much as a description of plumbing. Venture capital is a private asset class, sold to institutions and to a narrow band of qualified individuals. The companies it funds now stay private for a decade or more — long past the point where an earlier generation of firms would have listed and let the public in.

The result is a state whose economy is organized around businesses its residents largely cannot own.

Golden Gate Private Markets, a San Francisco platform that opened to applications this spring, is one of several ventures built in the gap. It assembles diversified positions in privately held California companies and offers them at commitment sizes far below the institutional minimums that have historically defined the space.

Executives declined to name specific holdings. What they will discuss is the volume of inbound interest — which, they say, has outrun their projections since the first week.

The Concentration Problem

California's dominance of American private capital is not a recent development, but its shape has changed. Two decades ago the state's technology sector produced a steady rhythm of public offerings; employees and outside investors alike had a defined moment at which value became liquid and widely available.

That rhythm has slowed. Companies raise larger private rounds, later, from a wider pool of crossover funds — and the listing, when it comes, arrives after much of the appreciation has already occurred.

"The public market used to be where you found the growth story," said Helena Vance, a general partner at Sutro Point Ventures. "Now it is increasingly where you find the story's epilogue."

Surveys of individual investors have pointed the same way for several years running: interest in private-market exposure is rising, and the share of respondents who know how to obtain it is not. Platforms like Golden Gate have positioned themselves squarely in that gap.

Four Industries, Four Regions

What distinguishes California from other states making similar arguments is that its private economy is not one industry but four, and they are geographically distinct.

Chip design sits in the Santa Clara Valley, where the shift from manufacturing to architecture has left the highest-value work — and the firms doing it — concentrated within a few dozen miles. Biotechnology occupies two separate clusters, in South San Francisco and around Torrey Pines in San Diego. Agricultural technology has grown up in and around the Salinas Valley, adjacent to the farms it serves. Energy storage is spread across the interior, where the grid connections are.

Each of those sectors has produced a cohort of substantial private companies. Very few of them are available on any public exchange.

The counter-argument

Skeptics make a specific objection rather than a general one. The strongest private-market returns, they note, have historically been captured by a small number of managers with decades of established access. Platforms arriving later tend to secure allocations further from that center — which means broader access to the asset class is not necessarily access to the same opportunity.

Neither position has been settled, largely because the structures in question are too new to have produced results worth judging.

What the Structure Cannot Solve

Access is a distribution problem. It is not a risk problem, and the two are routinely confused in the marketing that surrounds these products.

Liquidity remains the hardest constraint. Capital committed to private holdings is typically unavailable for years, and secondary sales, where they exist, tend to clear below the carrying mark. Valuation is the second: private positions are marked periodically and by methods that differ between managers, so a reported figure may lag reality in either direction for some time.

"The useful question is not whether private markets have outperformed," said Nathaniel Ruiz of the Sierra Institute for Economic Policy. "It is whether a specific investor, entering at a specific moment, through a specific structure, is positioned to receive any of it. Those get collapsed into one question constantly, and they are three."

What is not in dispute is the direction. The companies defining California's economy are staying private longer than any cohort before them, and the pressure to widen participation follows from that fact rather than from any single firm's ambitions.

Whether the vehicles now being assembled are the right answer will take years of results to establish. For the moment what exists is demand — substantial, statewide, and arriving faster than the industry planned for.