Recap: Wealth is the sum of all assets, minus liabilities and debt. Assets are specific items of value one owns.
Liquid assets are cash or “cash-equivalents” - items easily converted into cash without significant loss of value - such as bank accounts, money market funds and stocks - except for stocks (and bonds) that are prohibited by law or contract from immediate public resale. These “restricted securities” are typically held by company insiders, such as billionaires, with their wealth concentrated in one or a few companies.
Illiquid assets are investments or properties that cannot be quickly converted into cash without a significant loss in value or a lengthy, complex selling process. Examples of illiquid assets include real estate, private equity, venture capital, collectible art, and restricted securities. Even when legal or contractually allowed, selling Illiquid assets quickly is hard because these assets rarely have a ready pool of buyers and would likely require slashing prices, leading to substantial financial loss.
So where would billionaires get the cash to pay a wealth tax? Mostly from their liquid assets, which comprise around 31% or their asset holdings, on average (Altrata, 2024, Cato Institute, 2025). See Post I of this series for more details.
Method: I’m ultimately interested in how a billionaire wealth tax would impact the US economy and American people. To answer that question, even tentatively, requires answering a lot of other questions. My method will be to ask AI a question, review AI sources to confirm accuracy of response, and then tweak the AI summary for brevity, neutrality and relevance, occasionally incorporating AI information from related inquiries. I’ll generally use AI material from 3-4 sources.
I’m using AI in this series, because AI does a decent job of capturing the gist of its source material. However, I don’t assume the source material reflects the whole range of expert opinion on these issues.
Take-away from Last Post: Innovation is a primary driver of GDP growth. By applying new ideas and technologies, economies produce more goods and services with the same inputs, leading to higher wages, business profitability, and sustained economic expansion. In contrast to institutional investors and ordinary investors, the super-rich are well-positioned to take on the higher risks of young companies, provide patient funding for longer time horizons and offer hands-on guidance to foster innovation.
1. So, besides institutional investors, who else would invest in startups if super-rich reduced their investing?
If the super-rich reduced their investing, startup funding would likely shift toward a more democratized landscape driven by crowdfunding platforms, angel groups, smaller venture capital funds, corporate venture capital, and government-backed initiatives. These alternative sources, including individuals pooling funds, already exist. Startups might also rely more on their own revenue growth rather than external capital, an approach known as bootstrapping. Sources: Cato Institute, 2021, The Balance, 2022, Price Economics, 2013
2. Would [these alternative sources of investment] be able to replace super-rich investors in funding start-ups?
Crowdfunding platforms are unlikely to entirely replace super-rich investors (such as venture capitalists and angel investors) in funding startups. Instead, they have matured into a complementary, specialized funding source that is transforming the early-stage landscape, particularly for consumer-facing or community-driven companies. While crowdfunding offers a powerful alternative, it lacks the massive capital, high-level mentorship, and specialized expertise that Venture Capital (VC) firms provide to scale high-growth startups. Sources: Management Science, 2024, MBS Research Centre for Entrepreneurial Finance, 2023, JP Morgan, 2025
Angel Groups & Syndicates pool funds from many smaller investors, providing a similar level of capital but from a broader base. Angel groups and syndicates of small investors can supplement or replace individual wealthy investors for early-stage (seed) funding, but they typically cannot replace "super-rich" investors or Venture Capitalists for large, later-stage financing rounds. While groups increase capital, they face challenges in replacing the massive, quick funding and operational expertise that high-net-worth individuals provide. Sources: JP Morgan, 2024, Seedblink, 2024, Cato Institute, 2021.
Smaller venture capital (VC) funds—often referred to as micro-VCs—are not fully replacing ultra-high-net-worth individuals or "super-rich" investors, but they are increasingly competing with them and redefining the early-stage startup funding landscape. While small funds offer structured, strategic capital, super-rich investors (angel investors) provide unparalleled speed, flexibility, and personal mentorship, making them complementary rather than interchangeable in the 2026 investment landscape. Sources: Fin Model Lab, 2026, Venture Reflections, 2023, Chronograph, 2024
Corporate Venture Capital (CVC) is unlikely to completely replace super-rich investors (high-net-worth individuals, angel investors, and family offices), but it has become a primary force in startup funding and now frequently leads large funding rounds. However, CVCs can be bureaucratic, with slow and inflexible decision-making processes. High-net-worth individuals often invest in projects that CVCs find too risky or too niche. Founders often want to maintain control and avoid early dilution or giving away too much strategic influence to CVCs (e.g., board seats, right of first refusal). Qubit, 2026, JP Morgan, Entrepreneur & Innovation Exchange, 2022.
Government grants and accelerators are powerful tools for early-stage startup funding, offering non-dilutive capital and intense mentorship, but they cannot entirely replace super-rich investors (angel investors and venture capitalists) due to differences in scale, speed, and risk tolerance. Instead of replacing them, these public and semi-public programs act as a complementary force, helping startups reach a stage where they can attract private capital. Sources: Harvard Business School, 2024, Alien Technology Transfer, undated
Bootstrapping can replace super-rich investors for many startups by prioritizing profitability, sustainability, and founder control, often resulting in higher survival rates (35-40%) compared to VC-backed firms (10-15%). However, it generally cannot replace investors for capital-intensive ventures, such as biotech or AI, that require massive, rapid, upfront funding to scale. Sources: HSBC Innovation Banking, 2024, Vestd, 2025, That Round, undated.
Take-away: Alternative sources of investment mostly provide complementary and early-stage funding for start-ups. They certainly have a place but cannot replace super-rich investors due to differences in flexibility, risk tolerance, scale, speed, priorities, time horizon, personal commitment and mentorship.
Next: A Summary of Takeaways.