Investing in high-potential startups and their entrepreneurs has tremendous upside potential. Unlike real estate investments, which expect stable but lower returns, the benchmark for success in a venture capital fund investment is 10X+.
Therefore, it doesn’t make sense for The Pearl Fund to be one more real estate Opportunity Zone fund. The new tax laws and the current state of the US economy, along with our experience, background, skill set, location, risk tolerance and passion for true economic development via entrepreneurship all tell us that this is the time and the place to be pioneers in a brand new space. We are looking for investors who see and understand why we are doing this and want to be partners with us.
That said, we think a well executed real-estate-focused Opportunity Zone fund can be an excellent investment, and we recommend investors put the majority of their capital gains into one of the many good ones that exist today.
We think it is a good idea for investors to diversify and invest in several OZ/real estate funds, and then set aside a smaller portion of their gains to put into an Opportunity Zone Venture Capital Fund like The Pearl Fund.
The reason there are few if any other Venture Capital Opportunity Zone funds at this time is because they are more difficult and complex to operate than investing in real estate. In addition, there are significantly fewer individuals who can operate a Venture Capital fund, and even fewer who would be willing to do so with a relatively small pool of capital and in an area that needs economic development. Further, the Opportunity Zone regulations from the Treasury Department are vague and additional guidance is still to come. These are barriers to others and an exciting opportunity for us. It means the risks are higher than a real estate Opportunity Zone fund, but so too is the potential for rewards and impact.
For more on Opportunity Zone funds and Venture Capital see:
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