Recently, I saw that Naval has made another new move—and this time he’s playing a bit bigger. He and his co-founded AngelList have launched a fund called USVC, claiming they want to democratize private equity investing: with just $500, you can get in and buy into top Silicon Valley stars like OpenAI, Anthropic, and xAI. At first glance, it looks like a victory for financial equality, but once you lift the lid, the logic inside is far more complicated.

Let’s start with the attractive parts. In the past, Naval himself has invested in more than 400 companies—Uber, Twitter, Notion, and more are all in there—but those barriers were so high that ordinary people couldn’t realistically enter. Now, USVC sidesteps the “accredited investor” hurdle by registering as a closed-end fund under the Investment Company Act of 1940, so it can be opened up to everyone. The fund is huge: AngelList’s platform carries cumulative assets of $125 billion, with more than 4,500 fund managers and over 25,000 funds. Just from these numbers, Naval clearly has the confidence.

But this is where things get interesting. The homepage banner in big letters reads, “1% management fee, no performance fee,” aiming at the traditional VC rate of 2%. It sounds like a great deal—until you scroll down to the fee breakdown at the bottom. The full rate is 2.50% (during the waiver period), and after that it jumps straight to 3.61%. Why? Because USVC is essentially a fund of funds (FOF). Most of the money goes first to other fund managers, and those managers charge a 2% management fee and a 20% performance fee. Those costs are ultimately passed on to retail investors.

Even more intriguing is the fund size. According to disclosures to the SEC, as of the end of last year, USVC’s total scale was only $8.3 million. Of that, 56% was parked in government money market funds, with an annualized yield of just 3.66%. What you’re seeing is the flashy combination of OpenAI and xAI, but in reality, more than half the money is still in U.S. government bonds.

Naval’s team explains that the fund was just established, and cash deployment needs time, with projects still in the pipeline. But the issue is that this timing itself is very delicate. Over the past decade, private market valuations have already surged through a big cycle: OpenAI rose from $86 billion to $500 billion in three years, and xAI went from $24 billion to more than $200 billion in just 18 months. Meanwhile, public markets have already issued warnings. Figma’s IPO saw its private valuation fall below the private price by 50% within two weeks, and Klarna dropped from $46 billion to $6.7 billion. At this point in time, packaging and selling these positions to retail investors is a bit like distributing something that’s already gone through its run.

There’s also the liquidity problem. The quarterly share repurchase limit is only 5%, which sounds friendly, but if the market adjusts and underlying private valuations fall, the board’s rational choice is not to repurchase. Your $500 essentially can’t be turned into cash.

An analyst even asked a pointed question: are you buying a fund—or are you buying Naval’s attention from these past few years? The fund’s window period may depend on how long he remains chairman of the investment committee. This isn’t to say Naval has a problem, but rather that this structure is inherently built in with that kind of dependency.

“Democratization” has shown up several times in financial history, but every time, you have to ask one question: is what’s being democratized opportunity or risk? For this USVC, it could be both.