Our first recommendation is a business development company that focuses on growth capital investments in late stage venture-backed private companies. Our second is a sale of a previous recommendation.
GSV Capital (GSVC)
From Ian Wyatt’s Million Dollar Portfolio
In 1999, a man named Norman Augustine—who served as the Under Secretary of the Army from 1975 to 1977—launched the CIA’s venture capital firm. Called In-Q-Tel, the Virginia-based fund has a mandate to support U.S. intelligence activities by investing in new advanced technology.
In the past 17 years, In-Q-Tel has made a total of 104 investments. The fund typically acts as an early investor in startups, and invests alongside other established venture capitalists from inside the Beltway and Silicon Valley.
In June of2004, the 9/11 Commission Report outlined the intelligence failures that allowed the attacks to occur. That’s a key reason that In-Q-Tel was the original seed investor in a Palo Alto, Calif. startup called Palantir. The fund invested the original $2 million to get the company off the ground.
The unofficial mission of Palantir was “to prevent another 9/11 and find Osama bin Laden.” Thus far, the company has accomplished both objectives. Palantir is a software company that specializes in data analytics. That may sound boring, but it’s actually very exciting.
The company’s software pulls in data from countless sources—including phone records, email messages, airline reservations, security databases, financial records, fingerprints, DNA samples and law enforcement databases.
Palantir has continued raising capital. In total, the company has raised $1.9 billion in equity financing. The latest financing round valued the company at $20 billion, according to The Wall Street Journal. That makes Palantir the third-most valuable privately held, venture-capital-backed company in the U.S. Only Uber ($51 billion) and Airbnb ($25.5 billion) are more valuable.
The company’s value has been soaring. Back in December 2013, Palantir was privately valued at just $6 billion. That means the valuation has jumped 233% in a little over two years.
Because Palantir is private, it’s impossible to buy shares directly on a stock exchange like the NYSE or Nasdaq.
However, I already own shares in the Million Dollar Portfolio. That’s because I’ve invested in GSV Capital (GSVC). GSV is a publicly traded venture capital firm that’s bought a stake in Palantir and other private growth companies.
In fact, Palantir is the biggest holding in GSV’s investment portfolio. Currently valued at $56.4 million, Palantir is worth 16.1% of GSV’s investments.
It’s worth pointing out that GSV Capital shares are currently trading at less than $6. That’s considerably less than the $12.08 in net assets per share. And it means the stock trades at a 53% discount to the net asset value.
Today, GSV Capital’s market capitalization is just $111 million. Meanwhile, the value of its Palantir investment equals half of that market value.
Ian Wyatt, Ian Wyatt’s Million Dollar Portfolio, www.100kportfolio.com, 802-434- 6900, March 30, 2016