You Too Can Be A High Roller

By Daniel Eisenberg

When former biotech analyst Peter Freudenthal floated a plan for a publicly traded venture-capital fund last year, he learned how radical an idea it was. As he made the rounds of the venture capitalists on Sand Hill Road in Menlo Park, Calif., he found they didn't want to open their cozy world to hordes of retail investors. VCs were doing fine logging triple-digit gains by making early bets on dotcoms before they went public and swimming in cash raised from the likes of pension funds and the wealthiest individual investors.

But Freudenthal, 37, doesn't give up on an idea easily. He got all the way through Yale School of Medicine before deciding that a financial career would be more to his liking. He was determined to "democratize venture capital" and teamed up with Andy Singer, a colleague from San Francisco's Robertson Stephens investment firm. They finally corralled Tim Draper, a veteran VC, who wrote them a check for $4.5 million.

That was the start of meVC, which in June launched its $330 million meVC Draper Fisher Jurvetson Fund 1, taking stakes in such start-ups as Internet telephony player Pagoo and e-commerce firm Auctionwatch. Much like shares in a regular, closed-end mutual fund, meVC shares trade on the New York Stock Exchange (symbol: MVC). Unfortunately, because of this year's groggy market, meVC shares closed at $12.88 last week, down 36% from their initial price of $20. Since VC bets are notoriously risky, many critics think small-time investors shouldn't be fooling around with this business. Freudenthal counters that as long as you're betting only a small portion of your portfolio, 2% to 4%, "a professionally managed, diversified venture-capital fund is less risky than any single NASDAQ stock." And now, for the first time, it's a risk anyone can take.

--By Daniel Eisenberg