Recently, I noticed that Naval put together a new fund called USVC, and it’s been getting a lot of attention. On the surface, it’s a story about “democratizing” investing—being able to buy into shares of OpenAI, Anthropic, xAI, and SpaceX for $500, without needing to be a millionaire or going through the U.S. “accredited investor” certification. It sounds genuinely egalitarian. But if you take a closer look, things are much more complicated than the marketing makes it sound.

The tweet Naval himself wrote is indeed well thought out. He starts from the Age of Discovery, compares the change in the median age of U.S. companies at IPO between 1980 and today, and argues that retail investors are locked out of the private market. The whole narrative is polished—like the last time Silicon Valley took the effort to write a serious IPO prospectus. And the legal know-how behind building this fund via AngelList is also clever: it’s registered directly as a closed-end fund under the Investment Company Act of 1940, so it can be opened up to everyone, bypassing the traditional VC “accredited investor” threshold.

But there’s a problem. According to documents disclosed by the SEC, as of the end of 2025, the total size of the USVC fund is only $8.3 million. And of that $8.3 million, 56%—$4.65 million—is parked in government money market funds, with an annualized yield of only 3.66%. When you look at the lineup of the seven “star” companies on the homepage, you might think your $500 will be invested proportionally into OpenAI and Anthropic. But in reality, the entire fund’s scale is still under $10 million, with more than half in short-term government bonds.

The fee structure is also worth a close look. On the homepage, it uses the largest font to say “1% management fee, no performance fee,” contrasting it with the 2% management fee of traditional VCs. But when you scroll down to the detailed fee breakdown table at the bottom, the story changes. USVC invests the money into other emerging fund managers, and those managers themselves charge a 2% management fee and a 20% performance fee. In the end, these costs are passed on to the end investors. So the effective net fee rate is actually 2.50%. And AngelList is only temporarily waiving some fees until October 2026—after that, it jumps directly to 3.61%.

Assuming the underlying portfolio has an annualized gross return of 12% (meant to match the median of top-tier VC performance over the past decade), investors’ net returns during the waiver period would be about 9.5%, dropping to around 8.4% after the waiver ends. With 10 years of compounding, $10,000 would become $24,800 and $22,400, respectively. The difference is $2,400, which is about 24% of the initial principal. For a fund that markets itself as promoting “financial equality,” this is definitely worth bringing up.

There’s also the issue of liquidity. USVC’s shares are not listed on any exchange. The fund has the right to initiate repurchases each quarter, with a cap of 5% of net asset value. But this is the board’s “discretion,” not a contractual obligation. If in 2027 the market suffers a major drawdown and the valuations of the underlying private companies fall, the board’s rational choice would be to skip repurchases that quarter. So your $500 essentially can’t be realized.

Some people criticize this as Naval’s new “art of liquidity exits.” Over the past decade, private-market valuations have already risen by most of the major move. OpenAI went from $86 billion to $500 billion in three years, and xAI went from $24 billion to over $2 trillion in just 18 months. Meanwhile, the public markets have already provided some examples suggesting that private valuations may have been overly inflated. Two weeks after going public, Figma’s stock saw its private valuation cut in half. Against that backdrop, bundling and selling these positions to retail investors looks more like “distributing” assets that have already run up.

There’s an even deeper problem. Some analysts have directly pointed out that treating USVC as a fund with a limited opportunity window means the window length depends on how long Naval remains in the chair of the investment committee. Naval’s reputation, influence, and decision-making power are the fund’s most valuable assets. Once Naval’s attention shifts elsewhere, the fund’s appeal would be significantly reduced.

So the final question worth asking is: are you buying a fund, or are you buying Naval’s attention over those years? The term “democratization” has appeared multiple times in financial history, and each time, people ask whether what’s being democratized is opportunity or risk. This time, it may be even more complicated.