Making venture capital accessible to all through crowdfunding

If you want to invest in venture capital, now you can by investing in Fundrise Innovation Fund. It has democratized access to venture investing with a minimum investment minimum of $10 for all investors. In comparison, traditional venture capital funds are invite-only and have a minimum of $100,000 to $250,000.

My first venture capital investment was in 2007. I invested $70,000 in my college classmate’s gin company called Bulldog Gin, which ended up being sold to Campari in 2017. Looking back, investing $70,000 in a single private company at age 30 was irresponsible!

I knew nothing about the spirits market. All I knew was the founder, his experience in investment banking and his desire to succeed. Additionally, $70,000 as a percentage of my income and my investments was too high from a risk management perspective.

I am grateful that my investment was returned. However, since then I have learned to be much more strategic and responsible with my private equity capital.

Based on my research and experience, I am is not a proponent of angel investing (investment in individual private companies) due to adverse selection. All the best deals go to venture capital funds with stronger connections and expertise. That is why I mainly focus on investing in funds.

Why I invest in venture capital funds

In the past I wrote why I invest about 10% of my investable assets in private funds despite the fees.

One reason is to diversify my investments away from public stocks, public bonds and real estate. Public stocks are particularly volatile, which can be annoying once you’ve built up some portfolio value.

Another reason I invest in venture capital funds is to gain access to companies that stay private longer. Instead of buying a company after it goes public, I’d like to invest in more private companies earlier to try to capture the growth in their valuations.

Democratizing access to venture capital with fundrise - An interview with Ben Miller about the Fundrise Innovation Fund

In my ongoing search for the next pre-IPO Google, I am willing to continue to allocate a minority of my investable assets to private funds and pay a fee.

Unfortunately, with investment minimums between $100,000-$250,000, not everyone has the capital to invest in private equity funds – until now.

Making venture capital accessible to all through crowdfunding

In 2022, Fundrise launched its Innovation fund (my review). A year later, the Innovation Fund built a portfolio of promising investments.

With a minimum investment of $10, Fundrise gives everyone access to private growth companies. In addition to the low investment minimum, Fundrise does not charge a percentage of profits, only 1.85% from management. Traditional venture capital funds charge 2% of management and 20% of profits. Some charge 3% and 35%.

The innovation fund invests in five main areas:

  • Artificial intelligence and machine learning
  • Modern data infrastructure
  • Development Operations (DevOps)
  • Financial Technology (FinTech)
  • Property and Real Estate Technology (PropTech)

Investment in Databricks and AI

What really caught my eye was when Innovation fund recently invested $25 million in Databricks, one of the most innovative software, data and AI companies today. The company grew out of the AMPLab project at my business alma mater, UC Berkeley.

Today, Databricks is used by more than 10,000 organizations worldwide. Databricks has raised about $500 million from investors such as Andreessen Horowitz, Baillie Gifford, ClearBridge Investments and NVIDIA.

Part of my goal over the next five years is to build my investment exposure Artificial Intelligence. AI is clearly a positive long-term investment trend. I also fear our children’s work will be displaced by artificial intelligence, which is why I’m trying to ensure it by investing in AI.

Here are some of Databricks’ Q2 2023 financial highlights:

  • Exceeded $1.5 billion in revenue with more than 50% year-over-year growth, with the second quarter representing the strongest quarterly incremental revenue growth in Databricks history
  • Ended the quarter with more than 10,000 global customers, including more than 300 customers who consume more than $1 million in annual revenue
  • Achieved record non-GAAP underwriting gross margin of 85%
  • Closed acquisition of MosaicML, a leading generative artificial intelligence platform
  • At the Data and AI Summit in June, with more than 30,000 global attendees, 20 product and feature releases were delivered.

Kudos to Databricks

“Enterprise data is a gold mine for generative AI,” said Jensen Huang, founder and CEO of NVIDIA. “Databricks does incredible work with NVIDIA technology to accelerate data processing and generative AI models.

“Data and artificial intelligence have quickly become central to many business strategies. Databricks not only pioneered the Lakehouse category with a top-notch team and product, but is now at the forefront of generative AI for the enterprise. We are proud to extend our investment at such a pivotal time for the company, its customers and the data and AI industry.” – Alan Tu, Principal Private Equity Analyst, T. Rowe Price Associates, Inc.

If NVIDIA’s Jensen Huang invests in Databricks, I want too. The guy is worth about $38 billion and clearly sees the future.

I live in San Francisco and I can’t help but hear about AI everywhere. I also don’t want my kids asking me in 20 years why I didn’t invest in AI startups today. Even if I fail to invest in an AI winner in 20 years, at least I can say I tried.

I had the same anxiety about real estate, wondering why my parents and grandparents didn’t buy more real estate when they were younger.

A podcast about how venture capital works

The innovation fund is now open to all investors. I spoke with Ben Miller, the company’s CEO and co-founder Fundriseon the details of his fund, how the evergreen venture capital fund works, and future investments his team is excited about.

Keep listening Apple gold Spotify.

Podcast Interview Topics:

  • Why Fundrise got into private equity investing
  • How the investment process works to get deals and gain access
  • Value-added Fundrise can provide your investments
  • Valuations of private growth companies today versus 2021 and 2022
  • The power law and how the biggest investments make the most profits
  • Investment in Databricks, currently 25% of the pool (limit)
  • How returns work for an open-ended venture capital fund
  • How Fundrise has structured its fund to allow investors to receive liquidity every quarter if they so desire
  • Portfolio structure and how many investments the fund wants to make in the future

To learn more about the Fundrise Innovation Fund, click here.

Fundrise is a long-time sponsor of Financial Samurai.

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