Investing in venture capital and tech can feel overwhelming for everyday investors. The success stories of early investments in companies like Apple and Uber draw many in, but typically, venture capital seems out of reach for anyone but elite firms. Fundrise aims to change this with its “Innovation Fund,” which takes a more accessible approach to fintech investment.
On the “Onward” podcast, Fundrise CEO Ben Miller talked about how venture capital typically sources money from big institutions like endowments and pension funds. The Innovation Fund is different because it opens up venture investing to the masses, aiming to democratize the field.
The Fundrise Innovation Fund is available to private investors and targets rapidly growing private tech companies. Areas like artificial intelligence and machine learning, usually dominated by venture capitalists, are now accessible to regular investors. The fund seeks to level the playing field and offers a chance to invest in major private tech firms before they go public.
While it primarily focuses on late-stage, pre-IPO companies, the fund also considers early-stage startups and keeps some public stocks. Current investments include well-known names like Uber, as well as lesser-known firms like ServiceTitan, Inspectify, and Vanta. This shift comes as tech companies are staying private longer than they did in the past, meaning everyday investors risk missing out on significant returns.
For the long-term, the fund adopts an ‘evergreen’ strategy, focusing on sustainable growth rather than the short-term gains sought by traditional venture capital firms. The idea is to enjoy consistent returns over a longer period, which becomes more beneficial due to the power of compounding.
The Innovation Fund also embraces a ‘product-first’ strategy, emphasizing investments in promising pre-IPO companies based on their technology and business models. Unlike some venture capital firms that chase trends, the fund seeks to maintain a technological perspective when investing, aiming to find and support strong tech businesses.
Moreover, the fund departs from the typical venture capital fee model known as “2 and 20,” which involves a 2% annual management fee and 20% of the profits. Instead, the Innovation Fund emphasizes that profit sharing should align with risk-sharing. Its structure is geared more towards individual investors with long-term goals, setting it apart from traditional venture capital.
With a large base of individual investors and a user-friendly approach, Fundrise’s Innovation Fund represents a significant shift from the conventional venture capital landscape.