Real estate crowdfunding giant Fundrise bursts into venture capital – TechCrunch

Investing in private markets has long been reserved for the ultra-rich. Thanks to tech startups, however, the process is becoming much more accessible for those outside of the “richest 1%” of Americans.

Fundrise, a company that allows anyone to invest in real estate with a minimum investment of just $10, is making a big splash in the venture capital market with the aim of raising a new growth capital fund from a billion to invest in late-stage tech startups, he announced today. The new fund will be evergreen, meaning it will have an indefinite lifespan, a structure that, unlike the traditional venture capital model, gives investors the flexibility to come and go as they please.

Ben Miller founded Fundrise in 2012 to give retail investors access to the private real estate market, and the company has since become one of the top 20 investors by size in that space, Miller, who is CEO, told TechCrunch 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 reduce the costs associated with real estate investing appears to have paid 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 that to climb into the top ten by size in private real estate within the next two years.

If all goes as planned, the new growth equity fund will mirror Fundrise’s current real estate offering in its structure, allowing any investor to invest as little as $10 each. There are a few other players also looking to help individuals gain venture capital exposure in their portfolios, including Sweater Ventures and Allocate, but Fundrise’s offering is more widely accessible as the former has a minimum of higher investment at $500 and the second one is only available for accredited. investors.

All investment decisions for the fund will be approved by a three-person investment committee consisting of Miller as well as Fundrise’s chief strategy officer and chief operating officer. The company will aim to increase its $1 billion goal with customers already on its platform as well as new users, Miller added.

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

The low cost of Fundrise’s offerings stems from the company’s use of technology to streamline and automate processes such as maintaining shareholder records, according to Miller. Now that Fundrise has proven it can execute the low-cost model for real estate investing while delivering strong 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 venture capital more broadly.

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

As for Fundrise’s ability to find lucrative deals, Miller believes the fund’s launch now is the perfect time, as many startups are in desperate need of capital as venture capital deals have slowed significantly amid fears. of an economic slowdown.

“I feel fortunate that the technology market failure will create a better starting point for us. This is a once in a lifetime opportunity to get in…if we had tried to do this in 2021 we wouldn’t have been able to break in [to the venture ecosystem]“said Miller.

Leave a Reply

Your email address will not be published.