Investing in the private market has long been reserved for the super-rich. Thanks to tech startups, however, the process is becoming much more accessible to those who aren’t members of the wealthiest “one percent” of Americans.
Fundrise, a company that allows anyone to invest in real estate with a minimum investment of just $10, is rapidly entering the venture capital market with the goal of raising new $1 billion in growth to invest in late-stage tech startups, it announced today. The new fund will be evergreen, meaning it will have an indefinite lifespan, a structure unlike the traditional VC model that gives investors the ability to come and go as they please.
Ben Miller founded Fundrise in 2012 to provide retail investors with access to the private real estate market and has since become one of the top 20 investors by size in the industry. that area, Miller, who takes the role of CEO, told TechCrunch in an interview.
“When I started Fundrise, all the big real estate players told us we couldn’t do it, which was ridiculous. [and we] Miller said.
Miller’s strategy of using technology to reduce costs associated with real estate investments seems to have worked despite initial feedback. Fundrise manages more than $2.8 billion in real estate equity on behalf of 300,000 active investors on its platform today, and Miller said the company is growing fast enough that he hopes it will. will climb to the top 10 by size in the private real estate sector in the next two years.
If everything goes according to plan, the new growth fund will mirror Fundrise’s existing real estate offering in its structure, allowing any investor to put in as little as $10. la for each fund. There are a number of other players also looking to help individuals get access to VCs in their portfolios, including Sweater Ventures and Pointbut Fundrise’s offering is more widely accessible as the former has a higher minimum investment at $500 and the latter is only available to accredited investors.
All investment decisions for the fund will be approved by a three-person investment committee that includes Miller as well as Fundrise’s chief strategy officer and chief operating officer. Miller added that the company will aim to raise its $1 billion goal from customers already using its platform as well as new users.
The fund will cost investors a fixed 1.85% management fee, Miller said, which is significantly lower than the standard “2 and 20” fee structures that most traditional VCs use (fees). 2% management plus 20% execution fee on profit generated).
According to Miller, the low cost of Fundrise’s services stems from the company’s use of technology to streamline and automate processes such as keeping shareholder records. Now, Fundrise has proven it can follow a low-cost model to invest in real estate while delivering high returns (its real estate fund is up 5% this year while the S&P 500 is down). more than 20%), only time will tell if it can do the same for broader venture capital.
“The approach we’re going to try to take is basically not doing what the traditional venture industry does, which is [to] Hire a team of salespeople and analysts who actually spend their time selling, meeting, and trying to convince people to take their money. That’s the classic way of doing business. That’s how IBM used to do business 50 years ago, but that’s not what any SaaS company does anymore,” Miller said.
Regarding Fundrise’s ability to find lucrative deals, Miller is confident that launching the fund now is the ideal time as many startups are in dire need of capital as venture capital trading has slowed. significantly during the economic downturn.
“I really feel fortunate that the lapse of the tech market will give us a better start. This is a once-in-a-generation opportunity to come… if we had tried to do this in 2021, we wouldn’t have made it through. [to the venture ecosystem]”Miller said.
