D.C.-based real estate investment platform Fundrise LLC has launched a new fund that aims to make venture capital investing as accessible to small investors as its real estate funds are.
Unlike most venture capital funds, which typically attract large institutions and wealthy individuals, Fundrise's new "Innovation Fund" will be designed to appeal to investors with more modest means.
As a crossover fund, it will invest in both private and public technology companies, focusing primarily on later-stage companies, said Fundrise CEO and co-founder Ben Miller. Fundrise is looking to raise $1 billion and Miller anticipates that much of it will come from individuals. The fund will accept investments as small as $10.
The fund's rollout comes at a time when venture capital investing has cooled somewhat amid growing concern that the economy is headed toward — or may already be in — a recession. Still, Miller said it’s a space he had been eyeing before the slowdown and decline in company valuations and believes it is a good time to jump in.
“It made it a great time to start a new fund and come in at what I think will be the bottom of tech cycle,” Miller said in an interview.
Fundrise has just begun raising money for the Innovation Fund and has not yet made any investments. When it begins doing so will “depend on the market,” Miller said. He has not established a cut-off date for either fundraising or deploying the funds.
“We’re patient,” he said.
According to its website, the fund will invest more heavily in the public markets than the private markets to start. Because of the drops in stock prices for public tech companies, Fundrise wrote, "we anticipate investing and holding a larger percentage of public technology companies over the next several months as we wait for private market valuations to reset, which historically have lagged public markets by roughly 6-12 months.”
In the future, it may again decide to “hold a substantial portion of its assets in public stocks of technology companies,” the firm said.
Once it does start deploying funds into private companies, it will look to invest primarily in late-stage companies that have $10 million or more in yearly revenue within such areas artificial intelligence, machine learning and database infrastructure. Down the road it may also consider investing in other sectors, listing financial technology and real estate technology as two possibilities given Fundrise's experience with such investments.
"We’re still in the early part of exploration," Miller said.
The firm has hired one person with private equity experience and is still looking to bring on “a few more.” Miller plans for it to be a team with a mix of investment and technology experience.
Founded in 2012, Fundrise invests directly in developments and into real estate funds that invest in building projects. The company has more than 300,000 active investors who've invested from $10 to $100,000. Annual returns for client accounts were about 23% in 2021, according to Fundrise's website.
Locally, it's portfolio includes a $6.5 million investment in the Elysium Fourteen on the 14th Street NW corridor and $74.4 million total investment in a 13-acre commercial plot in Alexandria.
Miller said when he co-founded Fundrise 10 years ago, he wanted to make real estate investing more widely available. “Ten years later, we have,” he said.
