The Fundrise Innovation Fund is a fresh player in the investment scene, focusing on mid-to-late-stage private tech companies. They’re particularly interested in sectors with a promising future, like machine learning and artificial intelligence. The idea is to tap into trends that will continue to grow for decades to come.
Fundrise has been shaking up the commercial real estate market since 2010, and now they’re setting their sights on the venture capital market. It might seem like a strange move, considering their expertise is in real estate, particularly Sunbelt single-family and multi-family properties. But after hearing Ben Miller, the Fundrise team leader, explain his vision, it’s clear they’re onto something exciting.
David Packard, co-founder of Hewlett-Packard, once said, "More companies die from indigestion than starvation." He meant that if a company bites off more than it can chew, it can lose focus and run into problems. But Fundrise is building this new tech fund from scratch, so they’re in a good position to avoid those pitfalls.
I’ve been investing in private companies and venture capital funds since 2001. I do it to diversify my investments, as I’ve worked in investment banking for 13 years and rely on real estate for passive income. I also prefer to invest over long periods – the longer, the better. Most private funds have investment cycles of 5-10 years.
Living in San Francisco since 2001, I’ve developed a strong desire to invest in technology and innovation. Tech startups are part of the culture here. If I can’t work at a private tech company, I might as well invest in them.
I’m also an entrepreneur with Financial Samurai, a site I started in 2009. It’s just me and my wife running things, so we can stay lean and flexible. Even though I don’t have a team to manage, I have a deep understanding of marketing, finance, customer acquisition, business development, and more. I could be your favorite adjunct professor in business school!
Now, let’s talk about the Fundrise Innovation Fund. The timing of its launch at the end of 2022 was perfect. Tech valuations had collapsed, wiping out gains from the previous two to five years. This means Fundrise is now able to invest in great companies at better prices.
The Fundrise Innovation Fund is open to anyone interested in investing in private growth companies. The minimum investment is just $10, compared to $100,000 – $250,000+ at other venture capital funds. Plus, the Fundrise Innovation Fund charges a flat fee of 1.85%, with no carry fee.
The Fundrise Innovation Fund is a permanent fund, meaning it plans to continuously raise capital, invest in private tech companies, and distribute capital over time. This is different from traditional venture capital funds, which raise capital, invest over a two-to-three-year period, and return capital after a 5-10-year period.
The Fundrise Innovation Fund plans to invest in five areas: Artificial Intelligence & Machine Learning, Modern Data Infrastructure, Development Operations (DevOps), Financial Technology (FinTech), and Real Estate & Property Technology (PropTech). As of this post, the Innovation Fund has made 21 investments, most of which are in private growth companies.
If you’re interested in venture capital, start small and gradually increase your investment. It’s better to invest in a VC fund than in individual private companies. Remember, venture funds likely won’t return capital for 5+ years, so plan your investments accordingly.
Finally, I appreciate Ben Miller’s cautious approach to investing. As someone who experienced the 2000 dot bomb period and started building Fundrise soon after the 2008-2009 global financial crisis, he understands the risks and opportunities of investing during downturns. You can hear more about his approach in my hour-long interview with him about the Innovation Fund.
You can learn more about the Innovation Fund here. The minimum investment is only $10. For investors, the advantage of the Fundrise Innovation Fund is that you can see what’s in the portfolio before investing. With a traditional venture capital fund, you have to commit capital before any investments are made.
