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Crowdfunding giant Fundrise breaks through in venture capital – londonbusinessblog.com

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Investing in private markets has long been the preserve of the ultra-wealthy. However, thanks to tech startups, the process is becoming much more accessible to those who aren’t members of the “one percent” of the wealthiest Americans.

Fundraising, a company that empowers anyone to invest in real estate with a minimum investment of just $10, is making a splash in the venture capital market with the goal of raising a new $1 billion growth fund to invest in tech startups in a late stage, it announced today. The new fund will be evergreen, meaning it will have an indefinite life, a structure that, unlike the traditional VC model, will allow investors to come and go as they please.

Ben Miller founded Fundrise in 2012 to give private investors access to the private real estate market, and the company has since become one of the top 20 investors in that space, Miller, who serves as CEO, told londonbusinessblog.com in an interview.

“When I started Fundrise, all the big real estate players told us we couldn’t do it, it’s laughable [and we] shouldn’t do it,” Miller said.

Miller’s strategy of using technology to lower the cost of real estate investments appears to be paying off despite the initial setback. Fundrise manages more than $2.8 billion in real estate stocks on behalf of the 300,000 active investors on its platform today, and Miller says the company is growing fast enough that he expects it to rise to the top ten in private real estate within the next two years. .

If all goes according to plan, the new growth stock fund will mirror Fundrise’s current real estate offerings in its structure, allowing each investor to put in just $10 each. There are a few other players looking to help individuals gain venture capital exposure into their portfolios as well, including Sweater Ventures and Allocate, but Fundrise’s offerings are more widely accessible as the former has a higher investment minimum of $500 and the latter only available. is for accredited investors.

All investment decisions for the fund are approved by a three-person investment committee composed of Miller and Fundrise’s Chief Strategy Officer and Chief Operating Officer. The company will aim to increase its $1 billion target from customers already on its platform, as well as new users, Miller added.

The fund charges investors a fixed management fee of 1.85%, significantly lower than the standard “2 and 20” fee structure most traditional VCs use (a 2% management fee plus a 20% performance fee on earnings generated), Miller said. .

The low cost of Fundrise’s offering stems from the company’s use of technology to streamline and automate processes such as shareholder tracking, Miller said. Now that Fundrise has proven that it can execute the low-cost real estate investment model while delivering strong returns (the real estate fund is up 5% this year while the S&P 500 is down more than 20%), only time will tell. learn whether it can do the same for venture capital in general.

“The approach we’re going to try is basically not doing what the traditional venture industry does, which is: [to] hire a bunch of salespeople and analysts who really spend their time selling and meeting and trying to convince people to take their money. That’s the old-fashioned way of doing business. That’s how IBM did business 50 years ago, but that’s not how a SaaS company does business anymore,” Miller said.

As for Fundrise’s ability to find lucrative deals, Miller believes the fund’s launch is now the ideal timing as many startups are in dire need of capital as venture capital deal closing has slowed significantly over fears of an economic downturn.

“I feel happy that the decline in the tech market is going to create a better starting place for us. This is an opportunity that only comes in once in a generation… if we had tried this in 2021 we wouldn’t have been able to break in [to the venture ecosystem]Miller said.

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