This year, Robinhood and Coinbase have become carriers of personal investment and speculation craze, and they are also the two most obvious beneficiaries of this craze.

In the first quarter, the huge stock trading volume drove Robinhood’s trading revenue to more than fourfold. The Bitcoin boom has an even greater impact on Coinbase, with transaction volume increasing by more than 10 times and revenue reaching an astonishing $1.6 billion.

Depending on your position, this either represents a breakthrough in individual investor empowerment or a bubble that will end badly. Either way, it is not small investors who profit from the trading volume ignited by their passion.

When ordinary punters have the opportunity to buy Coinbase stock Listed Earlier this year, the valuation of this cryptocurrency exchange had reached approximately $76 billion. Robinhood supporters are seeking a valuation of US$40 billion for its upcoming initial public offering. Individual investors who try to disrupt the party may be hurt: Coinbase’s stock is 40% lower than the price at which it started trading.

The big winner? An elite group of early entry venture capitalists and other private investors. At the beginning of the Coinbase transaction, Andreessen Horowitz alone had more than 11 billion U.S. dollars worth of shares-far more than Accel’s 7.7 billion U.S. dollars in Facebook’s initial public offering, which marked a historical high for VC.

This sums up the state of the private markets, which dominated the financing of the most promising technology companies during periods of high growth. With the soaring return on investment, the small circle of real big winners has gained disproportionate profits.

Venture capital itself has undergone a revolution, because new types of investors have found a way, and more “growth” capital is already available-so much so that the term “venture capital” itself has little meaning.

These participants—not public market investors—are now reaping handsome returns. In the past, only a few venture capital companies made considerable profits, and the performance of most venture capital companies seriously lags behind the open market. That has changed.

Steven Kaplan, a professor at the University of Chicago Booth School of Business, said that the average annual return of venture funds established between 2009 and 2017 is 10 percentage points higher than the S&P 500 index. This performance is not unprecedented—returns were even higher in the mid-1990s. But at that time, venture capital was a much smaller area.

The return needs to be placed in context. Investors in start-ups have been locked in for many years and need to get a premium due to insufficient liquidity. In addition, the outstanding performance of the most successful funds distort the situation. But even the median fund outperforms the S&P 500 index by 4-5 percentage points per year.

Even though more and more funds report good returns today, the old cliché of venture capital still holds: the huge gains are still shared by a small group of real big winners. Kaplan said the top-quarter funds are still 15% to 20% higher than the second-ranked funds each year.

Recent research conducted by him and others also showed that the same group of investment companies Always be among the best, Year by year.

This proves to a certain extent their skills in helping to build the company. For start-ups, top VCs are more valuable than their cash, helping them attract top talent and find customers.

But this is more like the result of a self-reinforcing cycle that has deep-rooted top companies. Having a well-known venture capitalist like Sequoia Capital or Accel ensures that start-ups are taken seriously. This provides a powerful motivation for the most experienced entrepreneurs with the best ideas to find the best venture capital brands. For venture capital, the key lies in the quality of the “transaction flow”-investment opportunities that walk in the door every morning.

The gravy train may not run forever. Kaplan said that the returns from venture capital will almost certainly continue to be highly cyclical, as more capital is sucked in and depresses returns.

At the same time, the risky investment portfolio established in the past decade can bring huge profits. As Coinbase and Robinhood have shown, personal investment may be rampant-but behind the scenes, insiders who own casinos are always at the top.

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