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VC Ravi Chiruvolu: Will start hedge fund called Top Shelf

Ravi Chiruvolu
Venture capitalist Ravi Chiruvolu is apparently throwing in the towel on the business, and joining the hedge fund rush, according to VentureWire item today (sub required).

It is significant because seasoned investor Roger McNamee told us more than a year ago that he decided not to do a hedge fund, because everyone else was doing one, and it was a sure way to get killed unless you have some sort of momentum, special insight or value to add.

We've been following Ravi over the years, as he moved through the VC industry, from Alta, to Charter, to GKM. Ravi's very open about the lessons he's learned, and we wrote a piece about him here a few years ago. He's now 37. Anyway, according to the VentureWire story, Ravi does have an answer for McNamee. Next year, he plans to launch Top Shelf Capital, a hedge fund to operate from Palo Alto, and he's doing it on a hunch that some public companies remain undervalued. He took note when publicly listed Niku had a market value of $15 million in 2002, and was then bought for $350 million in 2005.

But Ravi, we can't help rubbing this in: You're the guy who told us two years ago you'd never have made an investment in Google, right? ;)

Btw, note that hedge funds are starting to encroach on VC territory in some areas, investing for example in biotech companies that traditionally have taken their capital from VCs.

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Maybe I misunderstand some fundamental terms, but I can't tell what all the commotion is about regarding the VC/Hedge fund movement (VCs opening hedge funds, hedge funds investing in start-ups, etc.). A hedge fund, by definition, has no limitations to its investment options. They can go long GE, or they can short the Kiwi. They can buy real estate in Dubai or they can invest capital in early-stage ventures.

If hedge funds are beginning to invest in traditional VC areas, it only means that these funds think that's where the opportunities are. If VCs are expanding their investments from start-ups to other asset classes, that merely means they want more investment options to choose from.

Ultimately, the aim of each of these investment vehicles, like all other investments, is to maximize return for investors. No more, no less.


Michael Katcher on May 31, 2006 8:33 AM
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That's right, no limits. So you are competing with hundreds of millions of other investors, all making their own bets, based on their own specialities and insights, so if you are going to go out and do a hedge, you'd better have some sort of focus to survive -- at least, that's what I see McNamee saying.

Matt Marshall on May 31, 2006 8:58 AM
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hedge funds also invested in the late 90s gogo days (pequot/bowman/...) and made much money.


filed email on May 31, 2006 10:30 AM
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To be fair, the often used 8000 hedge funds number is slightly smaller than hundreds of millions.

As for the unique insight, the very fact that he's coming from the VC side gives him a huge advantage. At the hedge fund I work for, we're about 50% invested in private equity and 50% in more traditional asset classes (commodities, equities, fixed income, currencies, etc.). However, we aren't a hedge fund trying to be a private equity shop, or a private equity shop trying to be a hedge fund. Rather, there exist strong synergies between the two. Our private equity work in a given industry allows us to gain a unique insight into the public markets that other hedge funds don't have.

Applying this to Ravi's situation, his experience on the VC side should give him unique insight into the public companies that traditional hedge funds won't have. It's still entirely possible that he'll fail. I only take issue with the implicit assumption everyone seems to make that HF moving to VC and VC moving to HF is necessarily a stupid decision.

Michael Katcher on May 31, 2006 10:51 AM
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Hey, perhaps I came across a bit more bearish than I'd attended. I'd wanted to point out that Ravi *did* have an answer/focus, which is to invest in undervalued public companies. And yes, he does bring his (now very) varied VC skills to the table.

That said, when a guy like Roger McNamee says he thinks he has no chance in the hedge fund business because it is already too crowded, I think that's worth pointing out too.

Matt Marshall on May 31, 2006 11:05 AM
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Fair enough.

Michael Katcher on May 31, 2006 11:26 AM
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