GSV Capital will begin offering a publicly traded fund that will invest in private companies which have "$100 million and $1 billion in valuation, with revenue growing at more than 40% annually"
Will this be competition with venture capital firms? Certainly, GSV will provide liquidity for entrepreneurs. Exchange Fund and SharesPost provide liquidity today, but not on the same scale, and not appealing to retail investors.
Might GSV drive valuations higher artificially? As a publicly traded company, they'll be subject to the scrutiny of Wall Street just like everyone else. They'll have to generate returns over a shorter timeline than venture capital firms. With that increased sense of urgency, there may be some bias to overpay to ensure it gets a stake in those fast growing companies.
They are already carefully positioning themselves as allies to venture capital firms, however. No taking board seats, and a willingness to partner for recruiting and deal sourcing.
For entrepreneurs, the ability to get at this additional capital should be a positive. While the allure of cash may lead to looser operating discipline (see "fat startup" risks), this will certainly enable more capital-intensive startups to scale (think green or biomedical startups).
As for the investor? How will GSV perform due diligence on privately held companies? They'll rely on their sister company NeXtup: "NeXtup Research does not have inside information but gathers data through its proprietary methods". Buyer beware indeed.....not comparing this to CDOs or other complex securities....but the more information asymmetry for the investor, the higher the risk.
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