A small spin-out from a publicly traded behemoth launched with the ambitious vision of transforming their entire industry. Within just a few years, as capital markets shifted in their favor, they emerged simultaneously as both innovators & titans in their field.
We don’t often think of private equity this way, but that’s exactly what happened when KKR spun out of Bear Stearns and Michael Milken at Drexel Burnham Lambert catalyzed the junk bond boom of the 1980s.
KKR started with a single product, leveraged buyouts, which created an industry, ultimately culminating in the takeout of RJR Nabisco, chronicled in the book Barbarians at the Gate.

Ticker
Company Name
Market Cap ($B)
Dividend Yield (%)

BX
Blackstone Inc.
177
3.12

KKR
KKR & Co. Inc.
102
0.88

APO
Apollo Global Management
76
1.55

CG
The Carlyle Group
16
3.85

TPG
TPG Inc.
18
1.30

ARES
Ares Management Corp.
49
1.70

The 1990s saw the firm expand into Europe and Asia. In 2000s, the firm expanded into credit infrastructure and real estate and now counts tens of different offerings. The company went public in 2010, three years after competitor Blackstone did, which is captured in the book King of Capital.

We don’t often think of venture firms as businesses like this, but there’s no reason to believe that the evolution of the venture capital industry won’t mirror private equity.
A cottage industry in the 1990s, the asset class has grown to many hundreds of billions.
From its humble beginnings offering only early-stage capital, the industry has dramatically diversified into venture firms managing 12, 15, or even 20 distinct product lines: geography-specific funds, seed stage, early stage, mid-stage, growth stage, wealth management, secondaries, & sophisticated debt instruments for financing customer acquisition.
When the first venture firm goes public, what will it be worth? Well, we can develop a linear regression model based on current private equity firms’ multiples. We see that return on equity, operating cash flow margin, and revenue growth are the three most important factors. 1
Quite different from a software company where revenue growth and sales efficiency are the most important. Returns do matter, whether in the private or the publics – and that’s natural given that most of these stocks offer a dividend yield.
So what would a venture firm managing approximately $50 billion in assets, generating a 15% return on equity, growing in lockstep with the industry, & charging standard 2% management fees be worth? At least $5.5b—a unicorn of an entirely different species! 2

1I’m using price-to-book multiple in this analysis.
2It would very likely trade at a premium because the average fee of a venture firm is about twice that of a PE firm that’s publicly traded.
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